If your current financial outlook is “double, double, toil and trouble,” it’s time to take control and banish scary threats to your finances. Here’s how to ward off six common financial mistakes.
1. Spending Without a Budget
In today’s busy world, just over a third of Americans prepare detailed household budgets. It’s almost impossible to make good financial decisions without knowing how much cash is coming in and going out each month. A budget helps you identify potential spending cuts and savings opportunities — eating out less could help you save more for retirement, for example. An extra $100 monthly in your retirement adds up!
2. Identity Theft
Ghouls are out to steal your identity, using it to commit credit card fraud, loan fraud and other scary crimes. More than 14 million Americans had their identities stolen in 2018. Avoid identity theft by protecting your identity: shred documents such as receipts, credit card offers, bank statements and other papers that contain your personal information; use strong passwords for all credit card companies, banks and other online accounts; and keep your Social Security number secure. For more tips on safeguarding your identity, visit the Federal Trade Commission website.
3. Lack of Emergency Funds
Could you cover unexpected expenses like medical bills or car repairs? Just over a quarter of Americans make this common financial mistake and have no money stashed in an emergency savings account. Only 31% percent have enough to cover six-plus months of expenses — the amount professionals consider an ideal financial cushion — according to a Bankrate survey. To build your emergency fund, set (and stick to) a budget, set monthly savings goals and look for ways to boost your income through a second job or selling unwanted items.
4. Too Much Debt
Is your credit card bill frightening? The average household has credit card balances topping $15,210, according to NerdWallet. Add in debt from mortgages, car loans and student loans and achieving debt-free status can feel impossible. Create a plan to pay off debt. Cut back on spending and continue making minimum monthly payments on all of your balances while focusing on paying off high interest rate debts (like credit cards) first.
5. Poor Credit Score
FICO scores range from 300 to 850: The higher your score, the better your credit. A poor credit score (under 600) could lead to rejections on loan applications (or higher interest rates on approved loans) — it could even affect your ability to rent an apartment or qualify for a job. Paying your bills on time, reducing existing debt and steering clear of new debt can help improve your credit score.
6. Lack of life insurance coverage:
Life insurance protects your loved ones, providing them with the resources to cover funeral costs, debts, estate taxes and other expenses upon your death. The amount of life insurance you need depends on your financial situation and number of dependents but one survey found 20 percent of Americans with policies believed they needed more coverage. Talk to your Farm Bureau agent about whether your current life insurance coverage is adequate.
Paying attention to these common financial mistakes can help make your future less scary. Still scared? Your Farm Bureau agent/advisor is here to assist you with insurance and related financial questions.