6 Stupidest Money Mistakes You Can Make This Year, According to Experts
Written by
Lydia Kibet
Edited by
Zuri Anderson
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Your money is either working for you or against you. If you make dumb financial moves, you’re going to regret it. The worst part is that most people don’t even realize they’re making these mistakes until it’s too late.
Here are the stupidest money mistakes you want to avoid this year.
Selling Your Investments at a Loss
The stock market has been volatile this year, and it’s easy to get scared and feel like you should sell your assets before you lose money. That’s a huge mistake!
“One of the worst mistakes you could make this year is freaking out over a market dip and selling your stocks or 401(k) at a loss. That’s how people turn temporary downturns into real losses,” said Joseph Camberato, CEO at National Business Capital.
“With a new administration, the market might react negatively in the short term, and that’s perfectly normal. But don’t try to time the market. Stick with the S&P 500 and quality stocks.”
Delaying To Save for Retirement
Retirement might seem like a distant problem, something to worry about later. However, every year you delay saving for retirement, you lose out on the magic of compound interest.
Saving early and consistently is of utmost importance due to the power of compounding. There’s a huge difference between starting savings at age 25 versus age 35.
“Here’s an example: If a 25-year-old starts saving $20,000 per year for 30 years at an 8% annual return, they would have $2.5 million saved at age 55. But if this person instead started at age 35 and saved until age 55, they would only have $980,000 saved,” said Doug Carey, founder and president of WealthTrace. “Delaying saving by 10 years cost this person over $1.5 million. That is the power of compounding at work.”
Speculating Cryptocurrencies
Digital currencies are highly volatile, and speculating on them is the worst mistake you can make.
“The crypto market has never been a good place to invest. At times it has been a profitable place for some to speculate. My belief is, ‘Just Say No!’ should guide your actions with respect to crypto,” said Robert Johnson, professor of finance at Creighton University and CEO at Economic Index Associates.
“One cannot invest in the wide array of cryptocurrencies. One can only speculate. ‘Investing’ in Bitcoin and other cryptocurrencies is pure, unadulterated speculation. I put investing in quotes because this is not investing; it’s speculating.”
Holding Too Much Cash
Having money is good, but holding too much cash is dumb with inflation.
“Having an emergency fund and cash available to pay bigger bills throughout the year is necessary. However, at some point, it becomes too much. Most people should have three to six months of cash set aside for emergencies,” said Trevor Ausen, founder of Authentic Life Financial Planning.
“You also should have some cash available for larger expenses that happen throughout the year (car insurance and repairs, home repairs, medical bills). After that, 100% of your money should be invested. The only exception is if you have other larger purchases that you’re saving for, such as a home or car purchase and big travel,” Ausen added.
Thinking a Savings Account Is Some Kind of “Investment” Strategy
While savings accounts can grow your money, thinking about it as some sort of investment strategy is stupid.
“Yeah, 4 to 5% sounds nice compared to what we had before. We’re all happy our interest is better than 0.000001%, but if you’re just letting your money sit there instead of growing it, you’re basically letting inflation eat away at your future,” added Lucas Barcelo, founder of Thrivin Life.
Incurring Unnecessary Debt
Debt is a wealth killer. Incurring unnecessary debt is way riskier.
“There’s a lot of uncertainty about how the economy will look in the next six to 12 months. This is not the time to incur debt to add an addition to your house or finance a big trip,” said Ashley Morgan, debt and bankruptcy lawyer at Ashley F. Morgan Law.
“Keep any debt purchases to a minimum. If you need to buy a new car, try to limit the amount financed as much as possible. Limiting debt is always ideal, but right now, making sure you have limited it as much as possible is critical.”
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