3 Biggest Money Mistakes

By Kerrie Beene, CFP®

For the past few weeks at Rooted Planning Group, we have been focusing on education. We have introduced Sammy the Rabbit as a great free resource to teach your kids about money. We have also been giving money tips to young people and recent graduates. However, one of the best ways to learn is by learning from mistakes. Often these are mistakes we make on our own but hopefully we can also learn from other’s mistakes. Below are the 3 biggest mistakes I have personally made with money.

Automobile Purchases - I love vehicles. I know the make, model, and trim level of every vehicle owned by anyone I know. I like helping others pick out vehicles and researching them online. If I had a never ending flow of money I would own multiple vehicles.

However, a vehicle is a depreciating asset. This means it will go down in value beginning with the moment you make the purchase. The mistake I made was trading my paid for car in for a different one. The car I had was a great car and was paid for but I decided it was time for an upgrade. I convinced myself it was smart because I was buying a used vehicle. The reality was that I did not need one, I just wanted one.

According to Experian, the average car payment in 2019 was $554 per month. I can’t remember exactly what my car payment was when I did this, but If I had driven that car for at least 10 years and invested that car payment instead in something that could have earned around 5%, I could have had over $85,000 saved. This money would be very helpful right now as I prepare to start sending my children off to college. So, it is not always can you afford the payment, you also have to think about what are you sacrificing by having to make the payment.

The other mistake that people often make is trading in a vehicle that is not worth what they owe on it. This is called being upside down on the vehicle. Unfortunately, car dealerships will just let you roll that negative amount into your new loan. That means if you buy a $20,000 car and you trade in your vehicle that you are upside down on, your $20,000 will cost you way more because of the negative equity you brought over from the other loan.

Not Having Enough Savings - One of the hardest things for most of us to do is maintain a very hefty bank account. One of the most common terms you hear when people talk about savings is the “emergency savings.” This is 3 to 6 months of expenses in case of job loss or some other event. The idea being that you could live without an income for that period of time by using your emergency savings.

While we seem to maintain a savings balance, keeping 6 months of expenses has been very hard to maintain over the years. It seems like things that are not actually emergencies, like replacing tires or other expected expenses, sometimes cause us to dip into our emergency fund. These expected expenses are not emergencies, we know we will need to replace tires.

Maintaining the discipline to save for things we know we will need in the future is one of the most powerful skills to a successful future. Figure out when you will need the item and the price and start setting aside the money now.

Time - Time seems to slip away so quickly. This is probably the biggest mistake I have made over the years is thinking I will take care of something later.

This upcoming school year my daughter will be a senior and then heading off to college. While we have saved some money for college, we are not quite where would we like. Time has gone so quickly and I did not maximize the time I had to prepare for the upcoming expense. It always seemed like something in the future. Yesterday she was 12 and soon she will be 18.

This is my biggest piece of advice, do not wait until later to start saving for something. The sooner you start to save for something, the smaller amount you may need to save.

Small Business - Emergency Planning

By Kerrie Beene, CFP®

This month we are celebrating Women’s History month, and our focus has been on Women Business Owners. I had some fun stuff all laid out to talk about.  However, I have chosen to pivot on my original topic, given the current economic situation. Of course I will focus some on women, but our main goal at Rooted Planning Group is to help everyone.  And during this time, we want to help prepare our fellow small business owners, and clients in general, for this possible downturn or any future downturn. Being financially prepared for these types of situations is one of the most important things we can do.  

To begin, here are a few statistics on small businesses in the United States:

• 47% of U.S. workers are employed by Small Businesses

  • There are around 157 million workers in the U.S. 

  • 47% would account for 74 million workers

• There are around 30 million small businesses in the U.S.

  • 12 million of the 30 million are owned by women

• Only 50% of small businesses survive 5 or more years

• 19% of small business owners work 60 or more hours per week

• Female-led businesses have grown a spectacular 58 percent from 2007 to 2018

• Top 5 Woman Owned Small Business Industries:

  • Health/Beauty/Fitness

  • Food/Restaurant

  • Business Services

  • General Retail

  • Education

As a small business owner, below are some steps you can take to be prepared:

1. Remember our best resource, our employees:

   • Hire the right people from the beginning

   • Ensure everyone is clear on the mission and their purpose

   • Communicate, Communicate, Communicate 

2. Ensure Money is Available when Needed

   • Build up a savings balance for cash flow shortages

   • If financing is needed, secure a line of credit before it is needed

3. Postpone Large Purchases

   • Be disciplined in large purchases, do not overextend at any time

   • Always complete a Return on Investment

4. Continually Analyze Expenses

   • While we value our relationships with our vendors, continue to monitor these expenses and do cost comparisons often

   • Cut any unnecessary discretionary spending

5. Business Continuity Plan

   • Do you have a plan? 

   • If you do, this would be a good time to evaluate and update the plan