A recent survey of 1,000 middle-class Americans has found that many of them are concerned about long-term financial security. Unfortunately, these have not equated into families taking steps to ensure their financial future. Nearly two-thirds of those surveyed admitted committing at least one bad financial mistake, which costs an average loss of over $27,000. Here are some of the money missteps of middle-income people:
Not Having an Emergency Fund
Many families fail to put aside three to six months worth of expenses. While it is possible to draw funds from an FHA loan in Ogden or borrow money from your friends or relatives when you suddenly need a significant amount of cash such as when somebody in the family gets sick, or your house needs an urgent repair, it is still best to have savings allotted for emergencies.
Try to build an emergency fund that you can easily access when you need it. The amount should be enough cash to cover your monthly expenses for at least six months. Start saving what you can weekly and build upon these savings.
Paying Only the Minimum of the Credit Card Balance
Most credit cards require a minimum payment each month, which is usually a fixed amount or a percentage of the balance. Settling only the minimum debt can be tempting if you are on a tight budget, but the less you pay now, the more you will pay later.
Because money is tight, many families use credit cards to supplement their income, but only make the minimum payment. The best course of action is to minimize the use of credit cards and make an effort to make the full payment each month. If your balance has accumulated over time, come up with a game plan so that you can systematically pay off your debt.
Not Investing Money in Accounts Outside of Traditional Bank Savings
Savings accounts help you store and grow your money, but they are not the only vehicles for investing cash. Diversify your money investments outside of traditional savings, which tend to have low returns. You can invest in mutual funds for as little as $25 month.
Not Saving Enough for Retirement
Only one out of four Americans is comfortable in determining the amount of savings they need for retirement, so many fail to save enough for when they grow old. If you do not know how to get started, reach out to a financial professional who can help you come up with a personalized strategy to help you prepare for the future.
Underinsuring
$50,000 is the minimal standard of income protection, but you might need more than that. This fact is particularly important for those who bring in the money for the family. According to financial experts, the insurance coverage should be ten times the breadwinner’s income to replace the revenue in the event of death aptly.
Many middle-income Americans commit mistakes that cost them money. If you are guilty of any of them, make sure to rectify them so that you can free yourself from financial traps.