Most of us fret over big financial issues – whether we can afford a home, or if we’re investing in the right mutual fund – and tend to dismiss a lot of minor money concerns. The problem is, those minor concerns can cost us BIG TIME. Here are a few seemingly small slip-ups, and how to rectify them so they don’t hurt your nest egg down the road. We got these from Real Simple magazine.
- Mistake #1 : Overlooking parking tickets. Or library fines – we’ve mentioned that before. Here’s the problem: to raise revenue, a lot of cities and libraries are turning unpaid debts over to collection agencies, and once an agency takes over your debt – even if it’s only $20 – you can count on a big dent in your credit score. How big? Craig Watts is a spokesperson for the Fair Isaac Corporation – the company that developed the FICO score and he says these small fines will lower your credit score by 100 points or more! So, take care of fines and tickets as soon as you’re aware of them.
- Mistake #2: You cash out your 401(k) when you leave your job. If you do this, you will lose substantial future earnings because in 20 years, $2,500 – which is the average cash out – can grow to nearly $12.000. So, if you lose or leave your job, roll over your funds into a personal IRA, so your money continues to grow – tax deferred. That’s the word from from the Principal Group, one of the largest providers of 401(k) plans. In most cases, job hoppers can roll over multiple 401(k)s into a single account.
- Mistake #3 : You stop paying your student loan while you’re out of work. If you stop making payments on an average $20,000 loan for a year, you’ll pay an extra $1,300 in interest and fees. Instead, let your loan provider know that you’re out of work. By law, they must offer a program for customers experiencing economic hardship. You might be able to defer the loan, so you don’t have to make payments, and the government pays the interest. If you don’t qualify, ask about forbearance. It lets you stop making payments, although interest will still accrue, but at least you’ll be considered “current” on your loan.