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Common Money Mistakes
Smart investing isn't just knowing about the stock market or real estate. Being a savvy saver is also about using wisdom when it comes to simply thinking about how your money gets used on a regular basis. According to behavioral economists, there are several things we do with our money that costs us more in the long run:
1.) Spending when we should be saving.
According to the experts, there are moments when we know we should be saving, but that new model iPod has caught our eye. The part of the brain that craves instant gratification wins out and we buy the trinket of our desires. To avoid this, automate your savings. Max out the 401(k) or set up automatic investments to a mutual fund. At least your future will be taken care of (but if you get that toy and have to forego groceries, you're on your own.)
2.) Buying high and selling low.
If you’re like most people, you buy when the market is doing well and bail out when things get tough. Most people tend to project current market conditions on the future, and frankly now ain’t doing so well. The solution is to not watch the market everyday. Investments are meant to be long-term. They will lose value in the short run and you only stress yourself out by checking up every day. Economists say pick one day a year to check your investments and that’s it. Some may be more comfortable with twice a year.
3.) Getting suckered into extras.
Most people get nitpicky on their smaller purchases…by God, who wants to pay that FCC charge on the phone bill every month? But when it comes to larger purchases, most people rarely take a second look at the smaller fees. We liked the expert’s example: If you’re buying a $40,000 car and they offer you a $500 navigation system, looking at the big picture, that doesn’t seem like much. But ask yourself, if you already owned the car would you pay $500 for GPS? We thought not. Treat each entity separately and you’ll realize how much you’re wasting in fees.
Have you made any of these mistakes? What did you do to overcome them? Share your biggest investing blunders...we want to learn from you! [CNN]