Elisha Kovar joins us with advice on how to kick some of those bad money habits you may have learned from your father. While your father might have taught you how to throw a baseball or drive a car, their spending habits might not have been the best lesson they passed on to you. Many Americans are facing a retirement crisis because they did not plan properly. One bad habit you might have learned from your father is spending too much. Spending more than you are making on an annual basis can result in an accumulation of debt, foreclosure or even bankruptcy.
One way to avoid this dilemma is to set a budget and stick to it, along with having savings. Another common problem is becoming a “lifestyle creep”. This is when your friend tells you that they just got a raise and all of a sudden you see a brand-new car in their driveway. Rather than banking the raise into their retirement fund, people just go out and spend more, allowing their spending to creep up as they make a little bit more money.
Before you get the raise, you should determine what percentage you will be spending and what percent you will be saving in your bank account. The biggest bad money habit seems to be not planning adequately for retirement. While investment planning is very important, you also need to plan for future taxes, estate planning, estate tax planning, and healthcare costs.