Common Knowledge That Are Hurting Your Financial Goals

Skeptical womanIt is important to have financial goals in life regardless of your current situation. You can be one of the soon-to-be 2015 college graduates with a mountain of student loans on your back or the head of a family of eight that is dealing with negative net worth. You still need to aim for a goal with your finances which will help you put together the actionable items in your finances.

There are some people who measures up their financial strength  with net worth while some just looks at how much they have in the bank. There are also people who measures their finances with the number of cars they have or the numbers of room they have at home. Some looks at how many photographs they have of their travel overseas.

With the people that looks at their savings account, Statisticbrain.com shares that there is only an average of $3,800 in a family’s savings account. That means that if they correlate the amount to their financial strength that leads to the realization of their financial goals, they are in a precarious situation. They do not have enough to fund their goals in life much more have an emergency fund to address unexpected needs.

These can be hurting your goals

It is important to have a direction with your finances and you might be looking at various tips on how to reach them. With the multitude of information that you can find on how to help you get to your goals, you might be taking in harmful tips that are actually pulling you away from your objectives with your finances.

  • Spending money you don’t have. This usually happens when you take out loans to purchase things that you do not need and sometimes, to impress people you do not even like. Some of your financial goals could be buying your own house to support a growing family and that is acceptable. But if you are getting a mortgage loan just to impress the people that has been putting you down for years to prove a point, then this financial move is ill-advised. The same goes for using credit cards to buy nice clothes to show off in the office. Buy what you need not what can impress.
  • Paying off the oldest debt first. You need to remember how the statue of limitations work especially where you live as it differs from one state to another. The way it works is that debts that are left unpaid and hanging are scratched off the list after a definite number of years. It is best to concentrate on the new debt accounts if you have one before you tackle the old ones.
  • Spending money on credit monitoring. If one of your financial goals is to take out unnecessary costs in your budget, you might want to look at credit monitoring expenses. This is because it is one of the things that you can get for free. You are entitled to one free credit report per year from the major credit reporting bureaus. If you get one every four months then you essentially are able to monitor your credit year-round for free.
  • Average assumptions in planning for retirement. Your retirement should be part of your goals in life and planning for it takes years in the making. It does not only take time but smarts as well when preparing for the inevitable. You need to make sure that your financial goals include assumptions that are above average. If you assume that you will need a certain amount for healthcare in retirement based on surveys, always prepare for more than that. It might be also a good idea to prepare your retirement fund as if you will live to over a hundred. This raises the bar and gets you covered for a very long time.
  • Low risk long term investments. There are different types of personalities when people assess the risk level of their investments. There are those that are quite aggressive while some are too conservative with their money. But one thing you need to take into consideration when investing for your financial goals in life is the length of time you will leave the investment untouched. If it is a long-term investment and you do not need the money anytime soon, it is better to put the money in high-risk high-yield investment and you can choose to taper off slowly as you get older. It can bring in more to your investments rather than low-risk but low-return option.
  • Too much eggs in a single basket. This is already an age-old nugget of wisdom that consumers needs to be aware of. Even when starting to dabble in investments, one of the things that you will quickly learn to reach your financial goals is that you need to have a diverse portfolio of investments to cover unexpected losses along the way. It needs to be diverse to you have a mix of high-performing to cover the ones that are not yielding expected results.
  • Dipping into your retirement fund. As you save up your retirement fund, you need to remember what it is intended for. Seems pretty easy enough until you are faced with financial emergencies and you do not have reserve funds to speak of. You need to remember that there is a 10% penalty for withdrawing money in your 401(k) fund if you are aged 59 ½ and below according to Bankrate.com.  Be mindful that what you worked so hard on will just go to penalties.

Here is video to explain more about the withdrawal penalty in a 401(k).

Financial tips you might not be using

You would benefit in knowing some tips in reaching your financial goals after looking through some of the things that can actually hurt your objective of either being financially independent, being debt free or just simply having funds for retirement. Here are some things you might want to look into.

  • Keep a healthy mind and body. Your health is a financial investment as well because more than being able to work to earn a living, you get to stay away from costly hospital visits, over the counter medicines and even potentially going under the knife. Plus the fact that you get to do a lot more than just work because you have enough energy for your family and the things that you love to do.
  • Invest in quality items. It might run against trying to live below your means and your financial goals  but investing in quality items can actually help you in the long run. Take for example a good mattress and bed.  Sleepfoundation.org shares that we spend about 33 percent of our lives sleeping in bed so it would be a good investment to buy a nice and comfortable one to help you relax and re-energized for the next day. Being frugal does not always mean the least expensive but the one that has the most value.
  • Maintain relationship with people that matter. It might not have anything to do with money but continuing to keep in contact with people that makes life better makes your life a little better as well. This can ripple off to other areas of your life including your finances. The better disposition you have in life, the better your work output is as well.

When you are trying to reach your financial goals, you need to remember that you might be some stored financial knowledge that will actually do more harm than good. Be aware of how your actions, however good-intentioned they are would affect your goals in the future.