Imagine, you had a crystal ball that allowed you to see the financial consequences of every decision you made 10 years after the fact.

What would you do differently?

Would you listen your uncle’s hot stock tip? Does the big house purchase work out? Are the leather seats necessary in the new car? Was borrowing money from your 401k the right move?

We know that a crystal ball like this doesn’t exist, but there is there another way to see the results of your actions. We can forecast forward! This blog post will do just that.

I have complied 4 common mistakes people make that have drastic financial repercussions.

4 Mistakes that will cost you 

$100,000 over the next 10 years

1. Location Location Location

Choosing a place to live is a pretty big decision and moving could be one of the most stressful things you do.   With that being said, you want to make sure you pick the right place.   There are many factors that go into deciding where to live.

For some-safety, school, restaurants, access to public transportation is high on the list of importance. The question you have to ask is, how much money are you willing to pay to get everything on that list?  Is it an unlimited amount of money?

Let’s cut right to the chase –

The difference in any mortgage or rent of at least $650 a month will cost you $101,345 over 10 years!

This is provided you take that $650 a month, invest it and earn an annual return of 5%.

When you look at it that way, you should think twice or three times about the extra bedroom or bigger property if you don’t need them.

I think you would better off with $101,345 in the bank and a smaller property! I am not a firm believer of buying “bigger” and growing into it…  Most people just use the extra space to gather more “stuff” that just collects dust…

Free 1 Page Financial Plan Here!

2. Procrastination

The day you want to stop working, no one is there to just hand you a check and thank you for your service.  Most companies have stopped offering pension plans and have shifted the responsibility to their employees to save for retirement.

What kind of mistakes can be made here?

The answer is… WAITING TOO LONG TO GET INVOLVED.

As soon as you are eligible, you should contribute to your 401k plan.  The goal should be to get to the maximum allowable contribution as soon as possible.  ($18,000 in 2017)

Example:

If you contribute $18,000 a year to your 401k account for 10 years and it grows by at least 5% a year you will have $234,000

If you wait 5 years to start and contribute $18,000 for 5 years and it grows by at least 5% a year you will have $102,000.

More than $120,000 difference over the same time period!! (10 years from start to end)

If you can’t put the maximum amount in today, that’s ok! The message is, get involved!  Start small and put yourself on a schedule to increase the amount with every raise and bonus!

Check to see if you are on target here!

3) Health insurance is a MUST own.

62% of all personal bankruptcies are related to medical expenses.  62%!!  The average 3 day hospital stay is $30,000 and comprehensive cancer care can cost HUNDREDS OF THOUSANDS OF DOLLARS!  ( https://www.healthcare.gov/why-coverage-is-important/protection-from-high-medical-costs/) (Website not endorsed by IFS) Not having health insurance can be the biggest mistake you can ever make, with the largest financial repercussions.

4) Over trading can ruin your investment plan.

I know that it is easy to feel that inaction means no-action. But that is not the case.  If your financial plan calls for stock investments, typically less is more.  Less trading.  You should build a plan that connects to your goals and only make adjustments when things are out of balance.  Do not chase returns or fall into the fear and greed cycle.  (https://www.behaviorgap.com/avoiding-cycle-fear-greed/) (website not endorsed by IFS)

Example:

In 2016 the S&P returned 12% but the average investor only returned 5%, a 7% difference!    (https://www.cnbc.com/2017/01/04/most-investors-didnt-come-close-to-beating-the-sp-500.html) (not endorsed by IFS)

Why?  Because the average investor thought they were smarter than the stock market.  Rather than stick to their plan, they believed they could pick the best time to get in and out and ultimately failed.

If that trended continued:

$100,000 that earned 12% a year for 10 years would grow to: $310,500  while $100,000 that earned 5% a year for 10 years would only grow to: $162,800, a difference of $147,000!

The mistake of over trading can do irreparable damage to your portfolio and prevent you from accomplishing your financial goals.

Build a plan and stick to it!

So, there you have it.

I have handed you the crystal ball and now you know in advance what kind of financial repercussions your decisions can cause. Always think twice before signing the lease, passing on the 401k enrollment, going without health insurance and pushing the button on that buy/sell order. You might be making a $100,000 mistake!

As always, you can consult with me to discuss your personal situation.

Look for future posts on the best ways to build a financial plan and check out my recent post on buying vs renting.

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Thanks for stopping by and I hope you achieve financial success!