Learning how to effectively manage your money is an important part of financial wellbeing, no matter how much money is in your bank account. Building financial resilience is about more than just generating wealth, and in today’s blog we’ll offer a few specific threats to financial stability.

Financial Trap #1: Lack of budget.
Most people agree that a budget is a necessary component of financial health, but many don’t have one. Failure to adhere to a budget can be bad for your financial health, impacting an individual’s ability to build savings, pay off debt, track the flow of funds, and more. A budget means paying closer attention to how much money comes in and tracking where all of it goes once spent. Utilizing a budget can help you in achieving your personal financial goals as well as help steer your funds in the right direction.

Financial Trap #2: Too much debt.
Another financial trap to avoid falling prey to is taking on too much debt, and utilizing a budget can help in reducing your debt! Budgets can help in several ways, from reducing the likelihood that you’ll rely on more credit to fill in financial gaps, as well as helping you set aside funds for savings—which can be used for paying down existing debt obligations.

Financial Trap #3: Lack of protection.
When considering your financial future, avoid overlooking insurance. While it can be costly, foregoing the insurance entirely can end up costing you much more in the long run. Renters, homeowners, auto, health, disability, and life insurance policies are all examples of important types to consider. If you are a business owner, you may also want to consider business insurance to help protect your investment and livelihood in the event of an emergency.

Financial Trap #4: Lack of future planning.
Some financial experts suggest that up to 30% of Americans will have little to no funds set aside in savings or investments once they reach retirement age, and even those with retirement savings may not have set aside enough. It is never too early to start planning for retirement, no matter how small the contributions are. Be sure to take advantage of matched employer retirement contributions whenever possible.

Financial Trap #5: Assuming too much risk.
Any form of investment comes with some form of risk, but taking on too much risk can potentially create large financial problems. Given that no two financial plans are the same, the level of risk taken on while investing will vary from person to person. Consider speaking with a financial professional—like the ones in DCCU’s Member Investment Services—for specific investment advice.

Financial Trap #6: Engaging in suspicious investment activities.
When considering an investment, stay vigilant against any fraudulent activity to better protect yourself. In general, the riskier an investment is, the more likely it is to be deceptive. Conversely, the more risk-free an investment seems, the more you should investigate. Taking the time to carefully consider investments prior to providing funds can help you avoid financial losses or damages.

Financial Trap #7: Poor tax management.
Regardless of an individual’s income, effective tax management is a great way to support financial wellness. This is especially important when it comes to unforeseen circumstances impacting finances, such as a hefty inheritance or the separation of assets following a divorce. No matter the situation, making sure all taxes are paid and filed correctly is important to building ongoing financial wellbeing.

Financial Trap #8: Mismanaged assets.
When it comes to your assets—such as stocks, homes, etc.—you will want to make sure you are managing them most effectively for long-term financial growth. Managing assets is the process of identifying investments to buy, maintain, and trade, with the intention of strategically increasing wealth over time. Speak with your tax professional for specific advice on the best way to manage your portfolio.

For some, money management is a natural talent and understanding personal finances almost an innate skill. For others, however, learning how to budget and handle their finances can be a little overwhelming. If you could use a little help in making financial decisions or need someone to talk to about your finances, please contact our Member Investment Services team today.