Dan Benson - 12 Stupid Mistakes People Make with Their Money: A Step-By-Step Guide to a Secure Financial Future

STUPID
MISTAKES
people make with their
Money

12 STUPID MISTAKES PEOPLE MAKE WITH THEIR MONEY

2002 Dan Benson.

All rights reserved. No portion of this book may be reproduced, stored in a retrieval system, or transmitted in any form or by any meanselectronic, mechanical, photocopy, recording, or any otherexcept for brief quotations in printed reviews, without the prior permission of the publisher.

Published in Nashville, Tennessee, by Thomas Nelson. Thomas Nelson is a registered trademark of Thomas Nelson, Inc.

Scripture verses marked TLB are from The Living Bible, Copyright 1971. Used by permission of Tyndale House Publishers, Inc., Wheaton, Illinois 60189. All rights reserved.

Scripture quotations marked (NIV) are taken from Holy Bible, New International Version. NIV. Copyright 1973, 1978, 1984 by International Bible Society. Used by permission of Zondervan Publishing House. All rights reserved.

Scripture quotations marked NASB are taken from the New American Standard Bible , Copyright The Lockman Foundation 1960, 1962, 1963, 1968, 1971, 1972, 1973, 1975, 1977, 1995. Used by permission. (www.Lockman.org)

ISBN 0-8499-1681-X

Printed in the United States of America

02 03 04 05 06 BVG 6 5 4 3 2

CONTENTS

Are You Making a Stupid Money Mistake?

Counting on the Illusive Someday

Waiting till It Pours to Realize You Dont Have an Umbrella

Feeding the Monster

Believing You Are What You Drive

Borrowing Trouble

Ignoring the Money-Body Connection

Failure to Use Your Four Powerful Friends

Extreme Investing

Extreme Insurance

Teaching Stupid Mistakes to the Next Generation

Financial Clutter

Playing Someday with Your Retirement

This book is intended to provide accurate general information in regard to the subject matter covered. Nonetheless, inadvertent errors can occur, and financial products, market conditions, rules and regulations, and laws or interpretations of laws are subject to change. Consequently, the publisher and the author specifically disclaim any liability or loss that may be incurred as a consequence of the use and application, directly or indirectly, of any information presented in this book. Because every readers financial situation and goals are unique, it is recommended that a financial, legal, or tax professional be consulted prior to implementing any of the suggestions herein.

INTRODUCTION
Are You Making a Stupid Money Mistake?

If you find yourself in a hole, the first thing to do is stop digging.

WILL ROGERS

W ow, do I need that book!

How soon will it be ready? I want copies for my kidsand for their kids!

Quite often, after a speaking engagement or media interview related to my earlier books on personal finance, people ask me about my next project. During the past year, Ive been telling them about 12 Stupid Mistakes People Make with Their Money, and the response has been electric:

I could be your cover model for stupid money mistakes! one interviewer offered.

Did I ever need that book when I graduated from college! an audience member reflected.

You work hard to provide lifes necessities... to pay monthly bills and supply needs and wants... to handle unexpected financial emergencies... to provide for your childrens college and wedding expenses... and to save and invest for a meaningful retirement. You want financial freedomwho doesnt? But succeeding with your money is one of lifes biggest challenges because there are so many ways to blow it, so many pitfalls along the path to financial freedom.

Youve undoubtedly stumbled into a few of those traps yourself. As a former financial planner, Ive seen the damage caused by twelve all-too-typical mistakes people make with their money. Stupid mistakes, really. Little boo-boos that can postpone goals. Big blunders that can devastate dreams. Common missteps that otherwise intelligent, well-meaning individuals and couples easily, frequently make with their money. Its not that these good people are stupid; theyve simply made some stupid money decisions. And theres a big difference. The folks I quoted earlier were indeed wise to recognize that theyd slipped up and needed some guidance. It happened to be my privilege to show them how to pull themselves from the trap, dust themselves off, and start anew on the road to financial freedomsmarter, wiser, more hopeful about their financial futures, and a bit shrewder about the inevitable traps waiting for them down the road.

How to Attain Good Judgment

I would be dishonest if I were to pretend that I have not made any of these Stupid Mistakes myself. I have. Im reminded of the ambitious young man who interviewed the successful senior citizen:

Tell me, sir, how did you attain all your good judgment?

From experience.

And where did you attain your experience?

From bad judgment.

Indeed, if experience and bad judgment are good teachers, then I should be wise beyond my years. Much of what I now do right I first did wrong, and there isnt an honest financial adviser in the world who would tell you differently. So if you count yourself among the hapless souls who feel they can be poster children for the 12 Stupid Money Mistakes, please do not feel ashamed or that all hope is lost.

In fact, Im very encouraged at your realization that perhaps youve made a mistake or two along the way... and that you may be susceptible to mistakes in the future. Im encouraged that you want to learn smart ways to avoid the Stupid Mistakes, smart ways to manage and invest your money more productively, smart ways to indeed get your ducks in a row so you can:

handle future emergencies such as unexpected job layoffs, car or home repairs, and medical expenses;

provide for your childrens college education, wedding expenses, and other important family goals; and

enjoy a financially secure retirement in which you can live out your dreams.

The Journey to Financial Freedom

Im here to tell you that you, too, can extricate yourself from the money traps of your past, dust yourself off, and begin again your journey to financial freedom with a level of wisdom and confidence greater than ever before.

Thats why I take delight in preparing this book for you, for your present or future spouse, and for your present or future children. In the following pages youre going to discover twelve of the most common mistakes good people make with their money... the havoc or lost opportunity each Stupid Mistake can wreak in your financial life... smart ways to avoid those traps in the future... and, most important, the amazing benefits to your financesand indeed, your lifeas you steer clear of the 12 Stupid Mistakes and build a solid financial future.

For example...

When you learn to avoid Stupid Mistake #2, you will no longer be caught like a deer in headlights whenever a financial emergency crests the hill. Your next out-of-the-blue car repair or medical copayment will be far more manageable. Even a job layoff will be less stressful. (Notice I didnt say fun. Just less stressfulfor you and your pocketbook.)

Steer clear of Stupid Mistake #4, and youll save hundreds of dollarsmore likely thousandsthis year alone. It can mean saving tens of thousands over a lifetime, dollars you can put to work building financial independence.

If you break free of Stupid Mistake #5, youll regain control of hundreds of dollars each monthfound money that will help you free up your cash flow and save for future needs and dreams. Investing this money instead of washing it down the drain could make you