All of us can do better when it comes to personal finance. Here are some relatively easy fixes for 12 common financial mistakes that are probably hurting your lifestyle now and will have a negative impact well into your retirement. Most of these problems are shared by at least 50% of all Americans.
Big Financial Mistake #1: You Don’t Know What You Spend Money On Every Month
A Gallup poll found that a whopping 68% of Americans do not maintain a household budget. This can be a big financial mistake — especially as you enter retirement.
When you are working, it is perhaps reasonable that you get by month to month and just do some mental accounting to make sure that bills are paid and accounts are not overdrawn.
However, to have a secure retirement, you need to know how much money you want to spend every month for the rest of your life. You can do an infinitely better job with a retirement budget if you know exactly what you actually spend money on.
Furthermore, it is almost guaranteed that you’ll find some good opportunities for cutting costs. Little things can really add up. For example, some estimates suggest that an average household wastes $1,350 to $2,275 on food each year. You may also find that you are paying too much in hidden fees, errors on your credit card bills, unused subscriptions and more…
Easy Fix: Take one hour this week and write down everything you have spent money on in the last month. Categorize your spending. And then, do this for a few months in a row. Use this knowledge to make a better retirement plan.
Big Financial Mistake #2: You Own Too Much House
According to this NPR report, the size of the average American house has more than doubled since the 1950s. What’s worse however are the huge sacrifices we make to afford to live in these homes.
According to a report by the MacArthur Foundation, between 2011 and 2014, more than half of all Americans made at least one major sacrifice in order to cover their rent or mortgage payments. And, when they say sacrifice, they don’t mean skimping on eating out or a weekend away. To afford housing, 52% of households took on a second job, did not save for retirement, avoided medical care and/or ran up credit card debt.
Easy Fix: Retirement is the ideal time to consider relocating and downsizing to a more affordable home. As your biggest expense and most valuable asset, downsizing can have a massively positive effect on your retirement finances.