By Xavier Brenner Fellow Americans, listen up. We need to do way better at managing our money The U.S. savings rate is just 4.1% this year. And that puts the country 17th among 24 industrialized countries in the Organization for Economic Co-operation and Development. The median retirement account balance for all U.S. households is $3,000 for all working-age households and $12,000 for near-retirement households, according to one study. Ouch. Some of us make matters worse with unforced errors regarding our personal finances. Here are five common self-inflicted wounds to avoid:
1) Skipping 401(k) plans
Not participating in your company's 401(k) program is a common mistake. First off, you can save money on a tax-deferred basis. In other words, your contribution comes out of your paycheck before income taxes are deducted. That means your taxable income is less and your tax bill is lower. Yes, you pay Uncle Sam when you retire, but the overall tax savings are still big, thanks in large part to triple-compounding interest: on your principal, on the taxes you haven’t yet paid, and on the interest already earned. Many companies have programs that match a certain percentage of your 401(k) contributions. It's a great benefit and shouldn’t be overlooked. Having money automatically deducted from your pay each month is a smart and relatively “painless” way to save a substantial amount of money over the long haul.
2) Life Insurance
If you have dependents and your last name isn't Buffett or Gates, you likely need to have adequate insurance protection in the event that you make an unexpected exit from life's big parade. Getting the right amount of coverage at a reasonable price is crucial. Your odds of accomplishing both are usually better if you do this while you are relatively young and in good health. Work with an insurance agent to estimate how best to cover your lost income to cover future housing, living and educational expenses for your survivors.