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Marc A. Hebert's Money Sense: Haunted by the scary things people do with their money

By MARC A. HEBERT
October 27. 2017 7:58PM




Halloween brings out spooks, ghouls and things that go bump in the night, but it also brings out our wallets. The National Retail Federation anticipates that Americans will spend $9.1 billion on Halloween festivities. However, spending on Halloween fun isn't the scariest thing people do with their money. Here is a list of things that sends chills down my spine:

Having no emergency reserve. Whether facing a major car repair, job loss or some other unexpected expense, some people have no emergency reserve to serve as a buffer against financial hardship. A Federal Reserve poll showed that about 46 percent of Americans would need to sell something or borrow funds to cover an emergency expenditure amounting to as little as $400.

Waiting to fund education costs. Funding decisions shouldn't be made while purchasing a high school class ring. Decide early in a child's life what type of education costs you would like to pay and the best way to accomplish this goal.

Inadequate insurance. It is a terrifying burden to have all of your savings used to settle a lawsuit that proper insurance would have covered. Having the appropriate insurance might be the difference between a comfortable retirement and working long past the age you wish. Consider an umbrella policy to cover liabilities over and above the standard auto and homeowner's coverage. Disability insurance is important in case you aren't able to work. The last major area is long-term care insurance. For the young, this might pay for the costs of a nursing home due to an unforeseeable accident. For the elderly, nursing care might be needed to maintain a comfortable quality of life.

Poor debt management. Use credit wisely. Have a repayment plan. Seek counseling if needed. Here are some often overlooked examples of the poor use of debt: car title loans, payday loans, rent to own and bank overdraft fees.

Following investment fads. Following your peers instead of what might be in your own best interest could lead you to a financial setback. Take the time to develop an appropriate investment strategy to help you avoid expensive, emotion-driven mistakes when the market throws you a curveball.

Failure to diversify your portfolio. Keeping all of the stock your employer gives you and never selling it isn't the way to go. Neither is buying all U.S. large growth stock mutual funds. Do some research and be certain to diversify across both asset types and geographic regions.

Failure to prepare an estate plan. No estate is too small not to have a plan. A will is always an appropriate first step. At the same time, other documents, such as powers of attorney for finances and health care and livings wills, are usually prepared. These documents are important in case you cannot make decisions on your own behalf.

Failure to contribute to a retirement plan. Speaking of savings, retirement plans offered at work are good places to save money while enjoying a tax deferral benefit. The potential for a company match makes it even better. If your company does not offer a retirement plan, then traditional IRAs or Roth IRAs might be the perfect alternative. And don't be like the guy who said, "I'm not saving for retirement. That's why I had kids!"

Counting on the lottery to fund retirement. Playing and dreaming of winning the lottery can be fun, and Americans spend over $73.5 billion doing so. This is an average of $325 per year per adult. Considering that some retirements now span 30 years or longer, future costs must be carefully estimated. Plus, with inflation driving costs even higher, it is necessary to start saving money as soon as possible.

Marc A. Hebert, M.S., CFP, is a senior member and president of the wealth management and financial planning firm The Harbor Group of Bedford. Email questions to Marc at mhebert@harborgroup.com. Your question and his response might appear in a future column.


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