Oh, you naughty, naughty Minters.
Judging by the results of our Top Money Mistakes survey, most of you are confident about your good financial behavior—but some of you are getting coal in your nondenominational holiday footwear.
We asked you which of the ten common money mistakes you’re committing. These aren’t minor sins, like forgetting to present your Snackables coupon at the checkout.
We’re talking big-ticket financial failures that could land you in a Dickensian poorhouse or its modern equivalent: an underwater home.
These are, in no particular order:
Not saving for retirement.
Percent pleading guilty: 14%
I’ll be charitable and assume that some of you not saving for retirement are sitting on a family fortune or in the midst of a money-burning startup that will shortly put Google out of business. As for the other 13.9%, what’s your excuse?
Not taking advantage of tax-advantaged accounts like 401(k) or IRA.
Percent pleading guilty: 25%
Hmm. Hmmm. Let’s see if I can do some basic arithmetic: if 25% of you aren’t using tax-advantaged accounts, and 14% aren’t saving for retirement at all, that means 11% of you are saving for retirement but ignoring the giant tax breaks the government offers to retirement savers. In other words, you’re turning down free money.
Not following a budget.
Percent pleading guilty: 28%
Everybody hates the word “budget.” So call it a spending plan, or a savings plan, or a prosperity plan, or whatever euphemism takes you to the goal.
The point of a budget isn’t to arbitrarily restrict your spending; it’s to make sure you’re saving enough that you can spend the remainder without guilt or worry.
Not setting goals and checking on their progress.
Percent pleading guilty: 29%
Setting goals isn’t about tricking the universe into magically dropping a Ferrari in your driveway. People who set goals and measure their progress behave differently than people who don’t, because slacking on your goal makes you feel like a loser. Good financial goals are specific, ambitious, and realistic.
Not automating your savings.
Percent pleading guilty: 30%
For most people, saving is like exercise: it’s not fun while you’re doing it, but it feels good when you’re done. We can make exercise automatic by living in a place where walking is the most convenient form of transportation.
But automating savings is much easier: just set up an automatic transfer via your bank or paycheck deduction via your payroll office. You probably already do this for your 401(k); now do it for all of your savings goals.
Underfunding your emergency fund.
Percent pleading guilty: 49%
Look, we can argue all day about what constitutes a big enough emergency fund. A thousand bucks? Three months of expenses? Six months?
But any amount is better than the most common emergency fund balance: zero. Stocking an emergency fund is even less fun than saving for retirement, because you have to save up a substantial amount of money and then let it sit there, earning practically no interest, and hope you never have to use it.
But failing to build a sufficient emergency fund won’t prevent emergencies: it’ll just make an emergency worse by piling financial problems on top.
Spending too much on housing.
Percent pleading guilty: 20%
We set the “too much” cutoff at 30% of gross income. And that’s for your rent or mortgage payment plus insurance and, if applicable, property tax.
Why? Because spending much more than 30% on housing makes you vulnerable to serious housing problems if you lose your job or have a family emergency, and even in good times, spending 50% of your income on housing (which I see all the time) just doesn’t leave enough money for savings and other expenses.
Trying to keep up with the Joneses/sometimes living beyond your means.
Percent pleading guilty: 17%
Really, people? Only 17% of you suffer from status anxiety? You’ve never bought a particular phone because it seems like everybody else has that phone? You buy clothes purely on the basis of price and durability? Fine. I don’t want to admit it either.
Not insuring yourself.
Percent pleading guilty: 22%
The big three types of insurance that everybody needs to consider are life, health, and disability. Not everybody needs life insurance—you only need it if people depend on your income.
Everybody with a job needs disability insurance (but not everybody can get it), and everybody needs health insurance (ditto). Many employers offer supplemental disability insurance.
If you don’t get employer health insurance and have a preexisting condition, check whether your state has a high-risk pool. Failing to carry health insurance because you think you’re young and indestructible is incredibly foolish.
Carrying a credit card balance.
Percent pleading guilty: 26%
I don’t need to explain why credit card debt is a bad move any more than I need to tell you that smoking is bad for you, right?
So there you have it: ten big Money Boo-Boos. Now, if you’re innocent of all ten, and you’re really truly being honest, I have a special gift for you. It’s a one-way ticket out of town,* because I’m afraid you’re going to take my job.
*Offer not valid in the Eastern or Western Hemispheres.
Matthew Amster-Burton is a personal finance columnist at Mint.com. Find him on Twitter @Mint_Mamster.