Sharing Some Helpful Tips >> Suze Orman: 5 Money Mistakes to Stop Making This Year

At this time of year, you might be tempted to draw up a long, overwhelming list of goals for the coming months. Fortunately, there’s an easier way to put your best financial foot forward: If you can avoid a few common money missteps, you’ll be on your way to a richer 2014 and beyond. 


The Incredible Shrinking Paycheck

You’d like to save more for retirement, increase your emergency savings and pay off your credit card debt. But no matter how much you want to do the right thing, you find yourself spending your cash as soon as you earn it. Here’s an easy fix: Automate as many financial decisions as possible. Have the bank transfer a set amount every month from your checking account to your Roth IRA and savings accounts, and set up auto-pay for your credit cards. (Be sure to submit at least 10 percent more than the minimum due to pay off the principal sooner and limit interest charges.) The less you have to think about how to spend every dollar, the more likely you are to spend wisely. 


The Stagnant Stash

It’s normal to think about the future by focusing on what’s just happened rather than what took place in the past. But this tendency, called recency bias, could put your financial well-being at risk. During the 2008 recession, for instance, spooked investors quickly pulled billions of dollars out of stocks as the economy tanked; ma
ny of them didn’t reinvest their money in time to enjoy the market gain that followed—more than 150 percent since early 2009. When current events tempt you to make a hasty decision, remind yourself that market shifts, however unnerving, are temporary; the potential for growth is long-term. 

The Delayed Reaction

Time is key to building your financial security. Let’s say you start saving $200 a month at age 30. You could amass more than $398,000 (assuming an annual return of 6 percent) by age 70. Wait until 31 to start, though, and you’ll have about $25,000 less. That’s the power of compounding. This concept works in reverse with loans. Spend 30 years paying off a $300,000 mortgage at a 5 percent rate, and you’ll owe nearly $280,000 in interest charges. Send one extra payment a year, and you’ll shorten the life of the loan by more than four years while saving nearly $50,000 in interest. When it comes to tackling your financial goals, whatever they might be, there’s no timelike the present. 

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