March Madness of Top Personal Finance Mistakes – Final Four

Finance Mistakes

The March Madness tournament of top financial mistakes made by young professionals saw two upsets in the quarterfinals and play-in game last week. The #9 seed in the tourney, Paying Excess Fees, upset the #8 seed, Going to Grad School Unnecessarily, in blowout fashion. Minimizing fees has been found in recent years to be the single most important variable when it comes to future investment success, but given the opaque landscape of investment fees, it is no surprise that many young professionals are still guilty of paying them.

Despite the upset, however, the #9 seed was unable to best the top team in the tourney, Not Leveraging Your Most Valuable Asset – Time, which will face off against the peskiest mistake in the tourney, Not Having a Plan for Your Student Loans. #4 seed, Not Being Diversified with Your Investments, was upset by the #5 seed that heads into the Final Four arguably with the most momentum of any mistake in the tournament.

The stage is officially set for the Final Four in this year’s tourney and it will be fun to watch which mistake can punch its ticket to the big dance next week. Below are the match-ups for the Final Four of top personal finance mistakes made by young professionals.

#5 Seed vs. #1 Seed

(1)  Not Leveraging Your Most Valuable Asset – Time

The #1 seed in the tourney clobbered the play-in game winner in what turned out to be a fairly boring game. There’s just no arguing with the simple fact that the single greatest mistake many young professionals make is waiting too long to begin saving. On top of waiting, many don’t contribute enough to their 401(k) to receive the full employer match, which is essentially telling your employer, “No, I don’t want a raise, but hey, thanks anyway!” Time will tell if the expert’s consensus pick to win the championship can hold off the #5 seed and most formidable challenger they’ve likely seen since last year’s semi-final match-up against the #6 seed in last year’s tourney, Paying Excess Fees on Your Investments.

(5)  Not Having a Plan for Your Student Loans

The #5 seed in the tourney pulled off a big upset win against the #4 seed, Not Being Diversified with Your Investments, which has been a perennial contender and was actually voted most likely to upset a top seed in this year’s tourney by analysts. Despite their experience, the #4 seed just didn’t have the energy to overtake what has become an increasingly common issue for millennials and young professionals returning to grad school. In 2014, student loan debt surpassed credit card debt which was gave the #5 seed its first taste of victory and this mistake hasn’t turned back as the total student debt across the country tops well over $1.2 trillion or more specifically $1,200,000,000,000. It’s unlikely the #5 will be able to run the table against such a formidable foe, but ultimately time will tell if this is the year that student loans and the lack of planning that goes into paying them off, takes a run at the tourney crown.

#3 Seed vs. #2 Seed

(2)  Living with No Budget

Despite the negative impact of having poor credit on virtually every aspect of young professional’s finances, the #7 seed wasn’t able to muster enough to top the #2 and perennial contender in the tournament, Living with No Budget. Few would argue with the long-term implications of spending more than you earn on a consistent basis, which is oftentimes a direct result of not having a budget in place to help build awareness about spending habits. In fact, budgeting is ultimately the primary secret to consistent, long-term savings and helps to build a strong foundation around being fiscally responsible. Despite the power of a budget, the #3 seed in the tourney is a force to be reckon with and likely stands as the biggest threat to the #2 seed’s run for the tournament championship.

(3)  Being Underinsured or Not Insured At All

Life can change in an instant, which is why the #3 seed in this year’s tourney can undoubtedly have the most immediate impact on young professionals’ lives, particularly those with young families. Despite the fact that nearly 85% of Americans said they recognize the need for life insurance, only roughly 60% of individuals are actually covered. It’s largely because they perceive it to be three times more expensive than it actually is, according to a recent report by LIMRA. Fortunately for young professionals, life and disability insurance are surprisingly inexpensive and increasingly easy to purchase. The #3 seed has a tough match-up ahead of it, but its quick strike impact is difficult to defend especially given the many misperceptions about pricing, so time will tell which of these arduous mistakes can move on to the championship in this year’s tourney.

Be sure to check back next week to see how each mistake fared and who will be heading into the 2016 Tournament of Top Personal Finance Mistakes Made by Young Professionals.

About Matt Cosgriff, CFP(®)

Minneapolis Financial Planner | Intrapreneur | Young Professional | Millennial Guru | Tech Aficionado | Traveler | Food Lover | Minnesota Wild Fan | Movie Quoter | Follow on Twitter| LinkedIn

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