3 Ways You're Crushing Your Finances

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Let's chat about a few of the most common money mistakes out there, and how avoiding them can dramatically improve your financial future. 

1. Not taking advantage of free money
- Depending on which study you look at, somewhere between 1 in 4 and 1 in 5 Americans are not taking full advantage of employer matches at work. This is FREE MONEY. You should be contributing at least enough to your employer retirement plan to obtain the free match, no matter what. Don't forget HSA matches as well! HSAs offer triple tax savings as is, so the potential for free money being added to your account just sweetens the deal. Employer matches (if they match dollar for dollar), are literally an automatic 100% return on your investment REGARDLESS of the market. Compound that money over decades, and you have completely changed the lifestyle you can afford in retirement.


2. Carrying credit card debt
- Credit card debt is a horrific type of debt to carry. Because it is revolving debt, your payment is calculated differently than a mortgage payment, for example. A $2,000 credit card balance with 18% annual rate and minimum payment of 2% of balance (which is how it is commonly set up) will take you... DRUM ROLL PLEASE... over thirty years to pay off the entire balance and you will pay almost $5000 in interest. If that doesn't scare you, I don't know what will. Pay off your credit card debt IMMEDIATELY. If you cannot trust yourself to carry a credit card without carrying a balance, cut it up and close the account.
 
3. Saving money when you should be investing
- Once you have a liquid emergency fund in place in a savings account (or high yield savings account), your focus should be shifted from saving to investing. Even if you save 50% of your income, you will never maximize your potential for building wealth using a savings account. Let's create an example. Sally saves $10,000 per year and puts it in a high yield savings account, currently receiving about 1% annual return (ouch). Becky saves $10,000 per year, and invests it in low cost index funds. Because these are tax efficient and low cost funds, we will assume her overall rate of return is 10%. Fast forward 30 years. Sally has $351,327 in the bank - not bad! Becky, on the other hand, has $1,809,434. Not even comparable! Becky retires a millionaire, while Sally is sitting on 350K. If you want to learn more about investing, check out The Simple Path to Wealth by JL Collins.