4 Big Money Mistakes to Avoid

I’m going to guess you’ve made a financial mistake or two in your life. Who hasn’t? For some of us, it was more than an occasional late fee or random urge to overspend that brought us to our financial knees. But I’m not talking about the kind of blunders that got us into trouble—we could list those in our sleep. Instead, I want to focus on the mistakes people make while they’re working their way back to financial health.

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Whether you’re recovering from a season of unemployment or from a financial mess you created on your own, avoid these goofs and you’ll get where you want to go much faster.

1. Not saving. You’ve heard this plenty, and here it comes again: Jump to the front of the line—ahead of your creditors—when you divvy up your paycheck. Get over feeling guilty about keeping money for yourself.

You’ll need enough in your fund to pay all your bills for at least six months. But don’t let that big number discourage you. Start by saving enough to live on for two weeks, then up it to one month, and so on until you reach goal.

Put your savings on autopilot—you won’t miss what you don’t see. Commit to saving 10 percent of every paycheck. If you can’t start there, start with 2 percent. Then in a few weeks, change it to 5 percent, then 7 and so forth until you reach at least 10 percent.

2. Paying for college. If you must make a choice between adequately funding your own retirement and paying for your kids’ college education, put retirement first. The best gift you can give your kids is to make sure you won’t become a financial burden to them in your sunset years.

Kids have far more options for funding their college education than you have for your retirement. They’ve got scholarships, grants, financial aid, student loans, work-study programs and the not-to-be-forgotten method of working their way through college. Once your own future is secure and you’re out of debt, that’s when you’re in a position to help pay for education.

Getting Soaked: Good for Bedspread, Bad for Retirement Account

Dear Mary: I have an heirloom bedspread that is about 60 years old, embroidered with wool yarn by my grandmother. There are some brown spots on it, of unknown origin. Can I hand launder it after spot treating? What would be the best thing to treat the spots? I love your column. I’ve gotten so many good tips from it. Thank you. Marian

photo credit: make-it-do.com

photo credit: make-it-do.com

Dear Marian: Because of this item’s age, it’s difficult to know if it is colorfast. That would be my biggest concern, not the fact that embroidery is done with wool. If the bedspread has bright and or contrasting colors, test an inconspicuous edge or corner of the bedspread in warm or tepid water and mild soap to see if the colors start to bleed or run. If they do, you should take this bedspread to a dry cleaner that specializes in cleaning delicate and vintage textiles.

If not, and provided the bedspread itself is washable (I’m going to assume that it is), treat those stains with Soilove (you can read more about Soilove and where to find it HERE). Spray Soilove on each stain until saturated, then allow the bedspread to sit for awhile— 30 minutes, or so.

The Pain and Pleasure Principle

I don’t care much for pain. In fact I’ll do almost anything to avoid it. I also know that pain can be a good thing.

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The human nervous system triggers a sensation of pain to stop us from doing something that might cause a severe injury and to let us know that something may be wrong.

While we mostly think of pain in terms of physical well-being, I experience a certain amount of pain in parting with hard-earned money. It hurts. I hate the pain of payment. It takes away from the pleasure of the purchase.

Years ago, as merrily I made my way down the path of financial stupidity, I found two ways to avoid the pain of payment so I could fully enjoy the pleasure of purchase. It was like I’d discovered the ultimate way to have my cake and eat it too. I used credit cards. I wrote checks.

To my distorted way of thinking, paying with plastic or writing a check allowed me to enjoy the pleasure of the purchase absent the pain of payment. Payment by check meant to me that I got the goodies and the money was still there in my checkbook or my wallet. Oh, I knew that technically I’d spent it, but who wanted to be technical? It could take days, maybe even a week back then for the money to really not be there. Pain delayed was pain denied—pleasure enjoyed.

The Cheapest Way to Own a Car

There is nothing quite so expensive as a brand-new car. There are times, rare though they be, when financing a new car might be advisable. But generally speaking, the cheapest way to own a car is to buy a late model, used, domestic car with cash.

photo credit: ericpetersautos.com

photo credit: ericpetersautos.com

How can you possibly do that when you don’t have a lot of cash to get started?  Great question. The answer is found in these two simple rules:

Rule #1: Pay Cash

Rule #2: Always Make Payments

I’ll bet you’re confused. On the one hand in Rule #1 I’m telling you to always pay cash for your cars. And in Rule #2 I am telling you to always make payments. Both principles are true.

My Hate-Love Relationship with a Skillet

I really don’t know where I got the thing. It may have been a wedding gift. What I know is that I tried to use that cast iron skillet without success and I mean not even a little bit.

Food would become hopelessly stuck to it and burned beyond recognition. If it wasn’t turning out charred fare, it was growing a fine coat of rust.

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photo credit: WestChesterCycles c/o Flickr

In the interest of full disclosure, these shots above are not of my skillet. They are an apt depiction. Mine looked like all of the above. At the time, I wasn’t photographing my culinary disasters with hopes that one day I could share them with you.

Things got so bad, one day I threw that skillet and its sorry charred contents into the trash. What followed what a case of guilt that prompted me to dig it out, chiseled it down, put it through the dishwasher (the worst thing ever for cast iron) then banish it to the back of a closet.

Years later—OK decades—I pulled that skillet out of detention. I’d been learning that cast iron skillets are highly revered by experienced cooks. I was determined to take on the challenge of cast iron. I am proud to say I won that battle.

This skillet pictured below—now more than 40 years old—is the skillet I abused and which abused me right back. It has become one of my most prized possessions. All is forgiven and now my skillet and I have quite a thing going on.

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How to Splurge on a Budget

I got the biggest shock of my life the day I realized that living on a budget wasn’t the straitjacket or rigid “diet” I assumed it would be. In fact, it was my life as a credit-card junkie that put me in financial bondage.

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A budget saved my life because it allowed me to get out of debt. It gave me back my freedom. Want to know my secret for staying on a budget for so many years? I splurge. Seriously. And I do not feel guilty. I love nice things and I love to travel.

Family-Friendly Finger Foods

Are trips through the closest fast-food joint driving a hole through your food budget? It’s no wonder. Prices on all foods seem to be sky-rocketing, but fast food takes that prize. Yikes!

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Unlike supermarkets where every week you can find fabulous sales, you’ll never find sales at Wendy’s, McDonalds or Burger King. Or any other fast-food restaurant for that matter. I don’t consider an occasional coupon to be a Sale.

I know what you’re thinking: Chicken. Chicken Nuggets, Chicken Fingers, Chicken Sandwiches—they’re all so tasty from these places, so convenient and so kid-friendly.

Just consider this: In less time than it takes you to get into the car and drive to the closest drive-thru, you can make your own fast-food chicken fare—for half the price, or less. In fact, you can make a fabulous coating mix to mimic the best coated chicken you’ve ever eaten, in five minutes flat. And if that’s not enough, you’ll get three bonuses for your effort:

Try This Old Restaurant Cleaning Trick

Ever leave the coffee pot on overnight only to wake to a blackened, burnt on mess? Can’t get rid of the gunky build-up in your favorite carafe or thermos—stuff you can see, but not reach? Don’t toss them out before you try a cool trick to get them sparkling clean.

Photo credit: milkallergymom.com

Photo credit: milkallergymom.com

Dear Mary: I have a big stainless coffee thermos. The opening makes it impossible to get in and clean. I have tried baking soda and vinegar, but that hasn’t worked to dissolve and remove the build-up of coffee stains. I can look in and see stuff I’d rather not see. How can I clean inside my thermos? Karen

Dear Karen: I have the perfect solution: Ice and salt. Fill the thermos about 1/4 full of pieces of ice just small enough to fit through the opening. Add 3 to 4 tablespoons of ordinary table salt depending on the size of the thermos. Apply the lid. Now shake it up, baby! Swirl it round and round, first clockwise then counter clockwise; upside down, up and down. The salt will begin to melt the ice allowing the pieces to move freely. You’ll get a good workout, too.

The salt acts like little non-abrasive sanding blocks. You may have to do this for a few minutes if you have a nasty build-up, repeating as necessary. Rinse well with cool water. This old restaurant trick works with glass coffee carafes and glass-line thermoses, too. It‘s so much fun I almost look forward to a burned on mess in the bottom of our office coffee pot so I can amuse and amaze the staff.

Dear Mary: My husband contributes 8 percent to his employer’s 401(k) plan. Would it be wise to temporarily stop that contribution in that we have about $50,000 unsecured debt? Debbie

Dear Debbie: Yes, but only until your unsecured debts are paid. Putting your hard-earned money at risk is while you are carrying high-interest consumer debt is not wise. No matter how you cut it, money in a 401(k) is at risk. But investing in your debt carries no risk and offers a guaranteed rate of return. Here’s how that works:

Let’s say you have a $10,000 revolving credit card balance at 18% interest. Each month you are paying $150 in interest ($10,000 x 18% / 12 = $150). Great Aunt Gertie dies and leaves you $10,000. You can either pay off the debt or invest the money. Let’s say you invest it.

Things don’t go well and you lose some or all of it in the stock market. You still owe that $10,000 on the credit card and you’re still paying $150 interest each month. Now let’s say you go the other way and use the money to repay the debt in full. Every month you get to keep the $150 you were sending to the credit card company. That is your guaranteed 18% return on the $10,000 “investment” you made in your debt. It’s a sure thing regardless what happens with the economy. Now that’s a good deal! Caution: Even though you stop making contributions for a season, do not cash in his 40l(k) account. The penalties and tax consequence are too severe.

Dear Mary: It takes about two weeks after I mail my mortgage payment for the check to clear my bank. My sister says my lender is making me pay more interest by delaying depositing my check. Is it true? Mary S.

Dear Mary S: No. Your sister may be confusing your mortgage, which is a “closed-end contract” with an open-end contract like a credit-card account. The law treats the two differently. A closed-end contract has a fixed payment schedule. The interest portion of your monthly mortgage payment is the same whether you pay it early or at the last minute. A credit-card or revolving open-end contract works differently. Making your payment early allows more of it to go to the principal because interest is figured on the average daily balance. Federal law stated in “The Fair Credit Billing Act” requires open-end lenders to credit all payments on the date they’re received, unless no extra charges would result if they failed to do so. But with your mortgage payment it doesn’t matter on which day during the month it is processed, provided of course it gets there by the due date.

Hope that helps!