Review Common Money Mistakes

Most people try to avoid making major mistakes when it comes to managing their money. But we’re all human, and even the most savvy money managers and budgeters aren’t immune from making a few money management blunders. These 5 are common mistakes..

When leaving a job where you contributed to a 401(k) retirement plan, you’ll have a few options: You can leave the money in the former employer’s plan, roll it over into an IRA, or cash it out. The latter is usually the least-wise option from a financial perspective because taxes will be assessed at your current ordinary income tax rate and you could also be subject to a 10 percent early withdrawal penalty if you’re under age 59½.

Cashing out your 401K

It can be human nature to not want to invest money when the financial markets — and your account balance — go down. But this may actually be the best time to invest, because lower financial markets may mean lower asset prices. Remember the old investing adage: “Buy low, sell high.”

Not contributing in tough times

“Lifestyle Inflation”This is the term some financial experts have coined to describe what happens when an individual’s lifestyle rises commensurate with his or her income. So if you experience a 10 percent increase in your income, congratulations! But resist the urge to immediately increase your expenses by 10 percent. Go ahead and splurge on something nice if you like, but strive to save as much of the extra income as you can, instead of moving into a more expensive home or buying an expensive new car.

Paying bills late and bouncing checksMany people who pay bills late do so simply because they forgot, not because they didn’t have the money. To avoid this mistake, consider signing up for your bank’s online bill pay service, or for auto-drafts or online payments that are available from most utilities and credit card companies.

Your bank may also offer an overdraft protection service that automatically transfers money from a savings account to cover checking account overdrafts. There may be a small fee for this transfer, but it’s usually much less than the fee charged for an overdraft.

Carrying a credit card balanceA common misconception is that carrying a balance on your credit card will help improve your credit score. This generally isn’t true — in fact, it may even hurt your score. Worse yet, you will likely pay a high interest rate on credit card balances.

Some financial experts recommend paying your credit card balances in full each month, if possible, even if you have to take money out of savings to do it.

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. (DLA). This material does not constitute an offer or recommendation to buy or sell securities and should not be consideringin connection with the purchase or sale of securities.

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