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Couples of all ages and backgrounds can fall into a few financial pitfalls along the way. Understandably, millions of hard-working, intelligent men and women focus on their careers, families, and outside interests to the detriment of careful budgeting. When you have a hundred everyday responsibilities, it's not uncommon to procrastinate about money.
What are the kinds of errors that pop up most often? Some couples don't give enough attention to saving, while others overlook the potential of making long-term investments in real estate. Additional missteps include not contributing to two IRAs (individual retirement accounts), not keeping a close eye on spending, and owning two cars when they could get by with one. Which of the following money related mistakes pose the greatest threat to your financial health?
Not Saving Enough
If working adults make just one mistake, it's usually related to the amount of money they save out of each paycheck. There are all sorts of guidelines about the specific percentage, and various arguments can be made for different numbers. But, for most adults, 5% is an achievable, realistic goal for savings. It can take time for young married couples to build a savings account, but the benefits are well worth the effort.
Ignoring the Potential of Investing in Real Estate
Investing in real estate is a time-honored tradition among large numbers of working adults in all income groups. People flock to real estate because, unlike stocks and other paper-backed assets, it represents a tangible asset. However, it can be a challenge for investors to identify specific properties that offer long-term profit potential. Besides doing targeted research, studying neighborhoods, examining past growth statistics, and considering future retail or transportation growth in the area, investors have other responsibilities.
They must calculate a property's capitalization rate to understand whether investing is a good idea or not. If you intend to explore the real estate niche, begin by reviewing a complete, user-friendly guide on what the capitalization rate is, how to use the metric, and how to use math to calculate it for any property you're looking at. Couples should find out about the current state of the real estate market before investing their money elsewhere.
Focusing on One IRA (& Ignoring the Other)
There are so many benefits of early retirement planning you simply cannot ignore it. The law permits everyone to contribute to a retirement account. Currently, that means a husband and wife could each put $6,500 into an IRA, for a total of $13,000 per year. For those aged 50 and older, the catch-up provision of the law allows an additional $1,000 each, for a total of $15,000 per couple, as long as each person is 50 or older.
Owning 2 Cars When 1 Will Do
Cars can be money pits. In addition to maintenance, ongoing expenses include fuel, insurance, and monthly payments. Even if you own two cars and don't make any loan payments on them, dual vehicle ownership is an expensive practice. Most couples who own two cars can get by with one. It takes a little planning and the willingness to use public transportation on occasion, but the change can translate to significant savings.