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Rob West



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Sometimes we make conscious mistakes with our money.Other times, they’re the result of just not paying attention. Either way, they can be hazardous to your wealth. Today on MoneyWise, Rob West helps us learn from poor financial decisions of the past: our own, and those of others.Our goal is to avoid making these mistakes in the future.Here are a few of the mistakes covered on the program:
1.Living paycheck to paycheck, or spending all or most of what you earn. Rob recommends putting something aside each month in a savings account where you don’t see it and don’t spend it. Then adjust your spending so that you meet all of your monthly obligations. You’ll probably have to cut out some things that you’ve grown accustomed to. And almost everyone can cut something from their spending.
2.Not having an emergency fund. If you’ve addressed Item 1, you’re on your way to correcting item 2 as well. Keep saving until you have at least 3 months living expenses set aside.Your ultimate goal would be having 6 months’ worth in reserve.
3.Paying interest on consumer debt like credit cards. Many people pay for emergencies with their credit cards and this is where the trouble begins. You eliminate this mistake by correcting mistakes 1 and 2.
4.Making only the minimum monthly payment on debt you already have. Don’t be surprised if it takes 15 years or longer to pay it off that way. And that’s if you stop adding to the debt.
5.Not understanding how much things really cost. If you go out to dinner, put $30 on your credit card, and make only the minimum monthly payment, that meal will end up costing you 50 or 60 dollars.
6.Buying a new car. You should only buy a new car if you’ve saved up enough to pay cash for it, and paying cash for your cars should be the goal whether you buy new or used. You can only do that if, after you’ve paid off a car loan, you keep driving that car but continue to make payments to yourself into a savings account. You then use that money to buy your next car when you need it. If you can keep the old car running long enough and continue making payments to yourself, eventually you’ll have enough to buy a car outright. It may take a few cycles of car purchases to get there but, eventually, you’ll make it. So buy dependable, late modelusedcars until you can pay cash for a new one.
7.Not setting up a Roth IRA when you’re young. Once you have your emergency fund in place, start putting money into a Roth.You can do this even if you’re contributing to a 401k at work. You can contribute $6,000 a year into a Roth with after-tax money or $7,000 if you’re 50 or older. When you retire, you can withdraw that Roth money tax free.
8.Buying too much house. Too often we think of a house as an investment that always pays off.It’s not, and when folks look only at how much a home has appreciated, they fail to take into account what they’ve spent on upkeep, maintenance and repairs. The larger the house, the more those things cost. Keep your mortgage payments at or below 25% of your take home pay and you’ll not only have an easier time staying on budget, you won’t be paying more than you can afford for upkeep.

LISTENER QUESTIONS

Next on today’s program, Rob also answers listener questions:

●Is it beneficial for my husband to keep working to full retirement age? We still have a mortgage and I’m on disability.
●My department closed at my old employer and I’m transitioning into a new job.Should I leave my retirement savings in the 403b at my previous employer, or roll it into something else?
●I received notice from the investment company that handles my Roth IRA saying that they are closing out the current fund and I will no longer be able to contribute to it at the end of the year.Can I move it over to a new Roth IRA?And if so, how do I choose one?(Rob recommended theSound Mind Investingnewsletter, which reviews mutual funds and tracks their performance over time.)

●I’ve moved from full-time to part-time employment at one employer, and just started a full-time job at a second company.I’m not yet eligible for the new company’s 401k and will no longer receive company matching from my first company due to my new part-time status.Should I keep contributing?Or should I put my money elsewhere?(Rob recommended that the callerfind a Certified Kingdom Advisorin her area to help her review the options in person.You can do that on the MoneyWise.org website.)

●My tax preparer says that I have to make a minimum charitable contribution in order to get any tax benefit?Is that true?Or should I fire my sister and find another tax preparer?:-)

Remember, you can call in to ask your questions most days at (800) 525-7000 or email them [email protected] Also, visit our website atMoneyWise.orgwhere you can connect with a MoneyWise Coach, join the MoneyWise Community, and even download the free MoneyWise...

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