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5 Crippling Money Moves You Could Be Making Now

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What you earn is less important than what you do with the money you have.

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MINYANVILLE ORIGINAL Many people wrongly assume that making more money would solve their financial woes, but in reality, what you do with your money has far more impact than the amount of your paycheck. Here are five crippling money moves you could be making right now.

Skipping the financial baby steps to invest. Turn on any news program that focuses on the markets and the excitement of investing is palpable: There's breaking news, scandal, and constantly changing opportunities that allow your mind to wonder whether this is the big break that will contribute to an early retirement filled with pool time and umbrella drinks. In stark contrast, saving and paying off debt is dull, and frankly, a little depressing. It's only natural to be drawn to the action of "The Street" -- but that desire could cost you a boat load in the long term.

Financial counselor Andi Wrenn says that the most frequent financial mistake she sees are potential investors seeking advice how to get into the market before they're financially ready to start investing. Before you start reading up on the latest investing trends, conduct a bit of due diligence: Do you know your budget and spending behaviors? Do you carry debts? How's your credit health? And do you have a long-term financial plan?

"Unsexy" as these factors are, they encompass financial well-being. If you haven't mastered them, the odds are good that you'll benefit more from managing what you can control, like resolving debt, building savings, and knowing where your money goes, than by diving in to investments. Case in point: Investing will deliver about a 4% to 7% return on your money, if you're lucky, says Wrenn. On the other hand, paying down debts that currently cost you money (and could be as high as 21%) delivers a guaranteed reward in the long-term.

Not staying current on insurance rates and beneficiary designations. You may have insurance policies, a will, power of attorney and beneficiary designations in place, but when's the last time you checked in on them? Gerard R. Gruber, CFP and chief investment officer at Hayden Wealth Management, tells Minyanville that even clients with well-formulated estate plans commonly have issues with "inappropriately named beneficiaries and property titling that can cause a significant tax liability for their estate."

If you've named a beneficiary and your relationship with them has since changed, check in with your assets and ensure that you're not naming a person who no longer fits the bill. If you've had a child since you last checked in on your estate, make certain that they are appropriately named on policy documents -- and that you've taken steps to manage your tax liability in the process. If you carry insurance policies secured some time ago, Gruber says you may be overpaying. "Clients frequently hold onto old insurance policies with older mortality tables and that were issued with higher assumption rates. With mortality rates changing every 10 to 15 years, policies now are less expensive and more multidimensional."

Making buying decisions based on others. Peer pressure to make the certain purchases is all but unavoidable, especially now that personalized social media algorithms tell us exactly what our friends are reading, listening to, buying, and coveting. When it comes to investments, removing your emotions and the thoughts of others is key to a solid long-term plan.

Season Investments co-founder and portfolio manager David Houle says that he commonly sees people trying to "proactively manage investment assets without a rigid process in place. " As a result, they react to headlines out of emotion, and "step in and trade proactively at exactly the wrong times." But emotional financial errors aren't limited to investing. Think about the last time you bought a product at the suggestion of a friend or advertisement, adopted a lifestyle change because you read about it in the media, or even bought a certain type of car or house because you felt like you "should," having reached a particular age or income bracket. There is a cumulative effect that goes into all money decisions, and these decisions can ultimately derail even those who make sizeable incomes. The way to combat them? Devise a financial plan that maps out current and longer-term goals and filter out the noise by sticking to it.

Thinking you're too well off to worry about savings. The saying "The more you make, the more you spend" could be extended to "The more you make, the less you worry about saving." But in reality, your savings cushion should be appropriate to your level of income, and lifestyle. Henk Pieters, CFP and president of Newport Beach, Calif. based Investus Financial Planning, says that his working/middle class and wealthy clients commonly discount the need to have a significant emergency fund. Pieters recommends that all clients have at least three to six months worth of living expenses covered in an FDIC-insured savings account-provided they have a very stable career. Business owners and those in industries or salary tiers that present higher degrees of professional uncertainty need to save an entire year's worth of living expenses.

Not planning for disaster. In 2009, the online edition of The American Journal of Health published a Harvard study reporting that more than 62% of bankruptcy is medically related in some way. Perhaps the most concerning aspect of it was that "medical debtors were well educated and middle class, and three quarters had health insurance at the time bankruptcy was filed." Aside from having sufficient savings, it's important to educate yourself about the insurance coverage you have, and fill in gaps where you find them.

Steven K. Knudson, financial advisor at Intermountain Financial Group, says that even those with a "Group Long Term Disability" plan at work should add personal fixed income protection in a non-cancellable disability insurance plan to make sure assets are covered. Additionally he recommends securing adequate life insurance coverage as early as possible. "With term life insurance so inexpensive these days, get it while you are young enough to qualify and it's cheap enough that you can afford it."

Twitter: @WellnessOnLess
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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