How to Avoid a Financial Groundhog Day


In the movie "Groundhog Day," a small-town weatherman is fated to relive over and over again a day he would just as soon forget. Unlike the film, which ends happily, some of us wake up and find ourselves repeating the same financial mistakes time and again, with no happy ending in sight.

Here are four common financial mistakes many of us make-but we don't have to repeat them again this year.

We don't save enough for retirement. We know we should save 10 percent or more toward retirement from every paycheck, like many financial experts tell us, but year after year we don't bite the bullet. As a result, many of us are falling behind in our retirement savings.

According to a recent survey by the Plan Sponsor Council of America, we're doing a good job of participating in a retirement savings plan: 87.6 percent of eligible employees contribute to their employer's 401(k) plan. That's up from 82 percent in 2010. But the average salary deferral (pre- and after-tax) for all eligible participants was 6.8 percent. That's not bad, but for many of us, we can bump up that amount. It's generally an easy process that can often be done online in a few minutes. If you have questions, your employer's human resources department is a good place to start.

We don't check our account statements. While this tends to be the case in down markets, it can happen when markets are doing well, too. We get busy or simply don't bother to open, much less review, our statements for brokerage, mutual fund, or 401(k) or other retirement plan accounts. Ignoring account statements can blind us to problems in our accounts other than performance.

Simply put, failing to open our statements not only keeps us from engaging with our investments, but also keeps us from seeing signs of trouble. For instance, are there any trades or cash transfers that you didn't authorize? Are the trades reported consistent with trade confirmations you separately received? Are all securities and cash positions and any debits or credits accurately reflected?

Reviewing account statements regularly, especially at the start of a new year, also gives us the opportunity to review whether today's portfolio agrees with the diversification and asset allocation objectives that might have been set a while ago.

We don't save for a rainy day. How many times do we need to keep repeating the scenario of putting an emergency expense on a credit card, or going without, because we haven't built a financial safety net for just that sort of situation?

Emergency savings or "rainy day" funds are an important element of planning for the financial future. As with retirement savings, quite a few Americans do put money away for unplanned expenses. According to the FINRA Investor Education Foundation's 2015 National Survey , 50 percent of respondents have set aside funds sufficient to cover expenses for three months in case of sickness, job loss, economic downturn or other emergency. But the other 50 percent have not. As a result, many individuals and families likely will not be able to draw on personal financial resources if they were faced with an economic shock.

The good news is that it's easy to start a rainy day fund. Just start making regular deposits to a liquid account such as a savings account at a bank or credit union that provides even a modest return on your deposit, and from which your funds can still be withdrawn at any time without penalty.

We don't comparison shop for financial products. When it comes to choosing financial products-such as investments, credit cards, auto loans or mortgages-most Americans either do not comparison shop , or conduct only limited searches for the best prices or terms. For example, according to the FINRA Foundation's National Survey, nearly two-thirds of all credit card holders reported that they did not compare offers to find the best rates or conditions.

You can change that behavior pattern this year. Whether your goal is to purchase products for saving and investing or to tap a new line of credit (by acquiring a new credit card or taking out a loan), shopping around for financial products makes good sense-and can save you money over the long term.

If you're shopping for mortgages or credit cards, visit websites that aggregate information from a broad array of financial product and service providers. If investments are being recommended-such as bonds or mutual funds-be sure you know what you are buying. Because different financial products have different features, and the key factors to consider will vary from product to product. Nevertheless, asking how much you will pay in fees, what risks you will be assuming and whether you can change your mind once you say "yes" are all important questions.

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