Blind spots are hidden danger zones around a car that the person driving can’t see — and they exist in the world of money, too. Whether you realize it or not, chances are good you have a few financial blind spots of your own that are hiding in plain sight. They might make you break your budget or keep you from investing. They might make you spend too much money or spend money the wrong way.
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One thing, however, is certain. Financial blind spots never make you richer.
GOBankingRates designed this article to serve as a kind of driver-assist feature that beeps and flashes when hidden danger is riding shotgun in your financial life. The following 10 traps are both common and correctable, so if one of these blind spots sounds familiar, adjust your mirrors.
You Chase Credit Card Rewards While Paying Interest
Everybody likes watching their credit card points, miles and cash back pile up, but for some people, rewards are just a worm on a hook. If you pay your statement balance in full every month, cash back is free money. But if you slip, you get hit with finance charges that quickly wash away any rewards.
By chasing rewards blindly, you’re playing right into your credit card company’s hands. According to the most recent American Bankers Association data, nearly 40% of cardholders carry revolving debt — and that’s a record low. With typical credit card APRs ranging from 15%-25%, the rewards you earn will never outpace the finance charges you pay. Stop charging until you can pay in full.
You Let Valuable Rewards Slip Between the Cracks
During the pandemic, credit card companies changed up their rewards programs to reflect the realities on the ground. Many cards that originally offered airline miles and other travel perks, for example, switched to giving cash back for necessities like groceries.
A Bankrate survey revealed that many cardholders were not taking advantage of the new rewards structure, leaving free money on the table just when they needed it most. Whether it’s pandemic-driven or not, the incentives that lure you to choose certain credit cards and other financial products are worthless if you don’t keep up, keep track and keep what’s yours.
You Treat the Present Like a Dress Rehearsal
One of the most common barriers to saving and investing, according to Forbes, is good, old-fashioned procrastination. It will all somehow be easier in the future, the psychology goes, and you’ll catch up then.
“Then,” of course, never comes.
Forbes came up with a useful explainer on what it calls “the time value of money.” It goes like this: $100 in hand today is better than the same $100 in three years because you could use the time in between to put the money to work and make it more valuable.
Time is every investor’s most powerful tool and you’ll never have more of it than you do right now. Don’t wait until the time is right — it never will be. Start with whatever you have today.
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You Celebrate Tax Refunds
Everyone loves a big tax refund, but they shouldn’t. It’s not a gift. It’s payback for an interest-free loan you involuntarily gave to the federal government. Your employer withholds a portion of every paycheck and sends it to the IRS on your behalf, but that portion is usually bigger than it needs to be.
That makes for a sweet annual refund, which feels nice at the time, but all year long, the government was using that money — your money — instead of you. If you adjust your withholdings so that you get a smaller refund or no refund at all, you’ll keep the cash that’s rightfully yours in your own hands all year, allowing you to take advantage of the previously discussed time value of money.
You Take the Advice of Older Generations as Gospel
The wisdom of those who came before should be cherished. Their advice, on the other hand, should be met with a great deal of skepticism. That’s not because your parents don’t have your best interests in mind, it’s because when it comes to money, the old rules so rarely apply to the next generation.
Gen Xers came up in the time of the employer-based 401(k), but they took advice from parents who had pensions. Millennials started investing in a world of cheap online brokers, but they had to lean on the knowledge of parents who learned in a time when investing was out of reach for most because the services of a stockbroker were always so expensive.
Financial wisdom never goes out of vogue, but advice sure does — know the difference before you take mom and dad’s word at face value.
You’re Generous to a Fault
Generosity is a virtue — when it’s deliberate and voluntary. Giving in to family and friends who ask to borrow money, on the other hand, is usually a recipe for financial and social disaster. If you make more money than the people around you, you’ll become a target for handouts. By saying yes, you reinforce the idea that money comes cheaper or easier to you and that the natural order of things is for you to give and for them to take.
Most financial experts say that “no” should be your standard answer nearly all the time. If that’s your policy, there can’t be any hard feelings. If you make exceptions here or there, however, the expectations will change. Don’t feel obligated to offer an explanation, which only breeds negotiations, and instead be firm, but offer to help in a nonfinancial way.
You Let Generational Stereotypes Cloud Your Judgment
Baby boomers had it easy because they could buy homes in their early 20s as unskilled workers with high school diplomas. Gen Zers base their financial decisions on social media influencers. Millennials are job hoppers who care more about cushy benefits than salary.
Making blanket statements about millions of people you’ve never met based purely on their age is foolish, unhelpful and incredibly common. It’s self-defeating to waste time stewing on the breaks enjoyed by a privileged class that exists only in your imagination. Concentrate instead on what you’re doing according to where you want to be at your own age and station in life.
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You Compare Yourself to Other People
You might think you’re the last person on Earth not investing in cryptocurrency, or that you’re the only one among your friends who doesn’t own a home, or that you should have a certain amount of money saved by your age because a news article quoted that as the national average. Just like the perfectly cooked steaks and nights out on rooftop bars that your friends share on social media, you’re only seeing the other person’s highlight reel in most cases. Just like the obsession with generational stereotypes, you only impede your own progress by focusing on other people instead of concentrating on your own financial goals.
You Set Unrealistic Goals
Financial goals are great — unless they’re not attainable. Unrealistic goals are doomed to fail, and that failure will make it much less likely that you’ll ever set new goals in the future.
You’re not going to save 50% of your paycheck, at least not over any length of time. But if you start with a small, attainable goal — say, vowing to pay yourself first every month, even if it’s just 5% of your income — you get the psychological reward of watching your savings grow and watching your goals become realities.
You Ignore the Slow, Steady, Drip, Drip, Drip of Overspending
That free mobile game you like charges just $2 to remove the ads. The full version of your favorite wellness app is only $3 a month. The upgrade to the plus-version of your sports package is only $5 more for all those extra channels. Sure you already have Netflix and Amazon Video comes with your Prime subscription, but what’s another $15 for HBO?
Over time? It’s a lot, actually — especially when you tack it onto the pizza, Starbucks, Instant Pot and all the rest. It’s the oldest and most obvious financial blind spot of them all, but it’s still the one that hobbles more savers than all the rest in America’s consumer economy — overspending.
Despite all that’s changed, spending money is still the fastest and surest way to lose it.
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