Before I had kids, I was a bit fancy-free with my money. I bought whatever I wanted to whenever I wanted to. I could have gone done a path of financial ruin if a mentor hadn’t intervened. He sat me down and taught me the importance of saving for the future.
“You’re going to get married and have a family one day,” he said. “You need to start making better choices with your finances.”
I heeded his advice and started managing my money better. But many people don’t have a mentor to give them sound financial advice. Consequently, they end up in debt and struggle to make ends meet.
My financial journey hasn’t been perfect. I’ve made several mistakes with my money including one time when I looked at my bank balance and discovered that it was zero.
But I’m not alone. Many dads have made a few financial mistakes over the years. In my experience, these are 10 of the most common financial mistakes dads make:
10 Most Common Financial Mistakes Dads Make 1 of 11
Refusing to create a budget 2 of 11
Budgeting is hard. Sticking to a budget is even harder. If you want to keep your finances in order, you have to endure the pain. Start by tracking all of your expenses. Write down all of your purchases for the month, even those daily Venti Mochas. You'll be shocked by how much you actually spend. Use that list to build your initial budget. You'll probably have to make a few revisions over time. Keep working on it until it is something that you can actually live with. You may have to forego a new iPhone or flatscreen TV, but you will have peace of mind that comes with financial security.
No rainy day fund 3 of 11
According to a survey by Bankrate, more than three-fourths of Americans don't have enough money saved to pay their bills for six months. Half of the the people surveyed had less than three months' worth of expenses saved, and more than a quarter have no savings at all. It's important for dads to make sure their families have adequate saving. You should strive to save at least 3-6 months of living expenses. Try to save at least 10% of your earnings. Automatic deposit plans make it easy and you won't miss the money because it's taken out of your check in advance. Life is full of surprises and a rainy day fund will help you to be better prepared.
Misuse of credit cards 4 of 11
There is nothing inherently wrong with using credit cards. In fact, they offer protections that you may not get with your debit cards. Unfortunately, many people use credit cards to buy things they simply cannot afford. Don't fall into this trap. Use your credit wisely. If you can, pay off your balance at the end of each month. Pay with cash whenever you can.
Not having a will 5 of 11
No one wants to think about dying, but it's a fact of life and it's important to be prepared for the inevitable. There are many online sites where you can create a simple will. If your assets are more complicated, you should seek legal advice. After it's done, you'll feel better knowing that your family is taken care of.
Buying a house you cannot afford 6 of 11
The housing bubble taught us that many people purchased houses that they couldn't really afford and the aftermath was devastating. Many realtors and bankers will try to convince you that you can afford a house that is outside of your budget. Don't listen to them. Decide how much you can actually spend on a home and find a house within that price range. It may not be your dream home, but you will be able to sleep at night knowing you can afford the monthly payments.
Inadequate insurance coverage 7 of 11
Dads have to sort through so many types of insurance - health, car, homeowner/renter, life, etc. When you're setting up these policies, talk to your agent to make sure that you're adequately insured for the stage of life that you're currently in. Don't forget to get disability insurance policy. Your ability to work is perhaps your most valuable asset. Protect it.
Failure to teach your children good financial habits 8 of 11
Kids learn about money from observing their parents. Every purchase you make, every bill you pay, and every bank deposit is a financial lesson for your children. Teach them the importance of saving by being a saver. Teach them the importance of giving by donating money to charities. Allow your kids to review the family budget and make suggestions on how it can be improved. Give them an allowance and teach them how to manage it. Kids need to start learning about money at an early age. These lessons will pay huge dividends later in their lives.
Failure to keep your skills up-to-date 9 of 11
The job market is rapidly changing and those who don't keep their skills up-to-date will not be able to compete. You will be looked over for promotions, denied raises, and maybe even laid-off. If you want to continue to increase your earning potential, you have to keep learning. Go back to school and take some additional courses, attend seminars, ask your employer for job-specific training. You cannot rest on your laurels if you want to advance your career.
Not saving enough for retiirement 10 of 11
Gone are the days of big pensions and employee sponsored retirement plans. For the most part, workers are on their own when planning for retirement. An analysis from the benefits consultant Aon Hewitt suggests that you'll need 11 times your final working salary to have a comfortable retirement. The sad fact is that many people won't have anywhere near that amount. But there is still hope for you. Start socking away as much as you can into your 401K or Roth IRA. It's never too late to save for retirement.
Forgetting to enjoy your money 11 of 11
You've worked hard for your money and you have a right to enjoy it. As long as you've established a solid financial plan for your life, it's okay to make periodic splurges. Go on that once-in-a-lifetime vacation. Take your wife to that fancy restaurant. Treat your kids to a trip to the amusement park. Don't get so caught up in managing your finances that your forget to have fun.
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