7 things I would never do with my money
(as a personal finance expert and seasoned investor)
I unknowingly lit a lot of money on fire in my 20’s.
I made expensive money mistakes - I’m talking tens of thousands of dollars.
So many mistakes in fact, that at some point, I felt morally obligated to start a business with the mission of helping women build wealth by learning how to invest AND avoid the expensive mistakes I made.
Why?
Because with a bit of education, a lot of these mistakes are easy to avoid.
But most of us didn’t get the financial education we need to succeed.
I know I didn’t.
And even if you’re making big financial mistakes right now, there’s no time like the present to turn it around.
We are going to talk all about how to avoid costly mistakes at the free investing workshop next week so be sure to save your seat right here.
In the meantime, here are 7 mistakes that can’t cost you thousands (6 of which I’ve made in the past) and how to avoid them.
1. Investing Random Amounts Monthly
Instead of choosing a random amount to invest each month, it's crucial to be strategic.
Systematically investing a specific amount each month, especially in your IRA or 401(k), harnesses the power of compound interest.
For instance, investing just an additional $60 weekly could boost your retirement savings by about $350,000. Start with a plan that reflects your long-term financial goals, not just your current budget.
2. Paying AUM Fees to Financial Advisors
Assets Under Management (AUM) fees, typically around 1%, may seem minor but can consume a significant portion of your potential earnings over time.
When I had a financial advisory charging a 1% fee I did the math to see how much I would pay if I kept investing the same amount over the next 30 years.
$593,000. That’s how much I would have paid in fees with the path I was on.
(For context, I had about $150,000 and was investing $1,000/month at the time. At an 8% return I would have spent $593,000 in fees over time.)
Empowering ourselves with investment knowledge and opting for financial advisors who charge a transparent, hourly rate when needed is a better strategy in my opinion.
This can save you a substantial amount in fees, allowing you to keep more of your hard earned money.
3. Buying Annuities and Indexed Universal Life Insurance (IULs)
I always try to provide a balanced point of view so I will start by saying there are rare circumstances in which these products make sense.
The problem? These products are often riddled with fees and complexities and in many cases not suitable for most people.
People that sell these types of products are usually not advisors but sales people (who get tons of commission for these products).
My take? If you need insurance, get the insurance you need, not a product that someone tells you is an “investment” that’s making a lot of money off selling it to you.
If you are ready to take control of your money, I am hosting a free beginner investing workshop that will teach you 3 keys to growing your money in the stock market.
4. Trying to Time the Market
Market timing is exceptionally risky and can lead to significant losses or missed opportunities. The most effective strategy, particularly for retirement accounts like IRAs and 401(k)s, is consistent, long-term investing.
Avoid the temptation to buy low and sell high on impulse; instead, learn how to implement an investing strategy that aligns with your financial goals that doesn’t rely on good timing (like buying and holding index funds!)
5. Waiting to Invest Until Debt-Free
While being debt-free is an excellent financial goal, waiting to invest can cost you dearly in lost time and compound interest, especially in your retirement accounts.
Start investing as soon as possible, even if it's a small amount, to take advantage of the stock market's growth potential.
This is particularly important in tax-advantaged accounts like IRAs and 401(k)s where your investments can grow tax-deferred or tax-free.
Once you’ve paid off all your high-interest debt over 7%, you can consider paying just minimum payment on your low-interest debt and investing more in the stock market (which historically gets an 8% return).
6. Neglecting Mental and Physical Health
You are your best investment.
Ignoring mental and physical well-being can lead to higher healthcare costs and decreased earning potential later in life.
Budget for health maintenance as you would for any financial investment, ensuring you can enjoy your wealth in good health.
7. Investing in High-Fee Mutual Funds
High fees can drastically reduce your investment returns. Consider opting for low-cost index funds or ETFs, particularly in your IRA and 401(k), which often perform as well or better than higher-cost mutual funds.
Low-fee investments ensure that more of your money remains invested and grows over time, benefiting from the stock market's overall upward trajectory. Index funds and ETF’s are great ways to invest that with a little education make stock marketing investing so simple.
Investing in the stock market can be a powerful tool for achieving financial independence, especially for women who face unique financial challenges such as the gender pay gap and longer life expectancies.
By avoiding these common pitfalls, you can maximize your returns and build wealth that supports your long-term financial security.
If you are ready to take control of your money, I am hosting a free beginner investing workshop that will teach you 3 keys to growing your money in the stock market.
