Essay on The Spanish Civil War

Financial blunders are made all the time and everywhere – at the grocery store, at the bank, in the housing market, in the stock market, with your children’s allowance. Some stem from a lack of knowledge or awareness, while others are the result of human behavior that often works against our own best interests. The worst mistakes you can make, though, usually involve those that seem harmless but end up impacting your overall wealth.

We spoke with financial advisers about the worst financial slip-ups people make and how much they can cost you. No doubt the opportunities to mishandle your money are endless, and this list is by no means exhaustive. But here are some money moves you should strive to steer clear of.
1. Spending an unexpected windfall. All of it.
Two-thirds of baby boomer households will likely receive some inheritance, with a median amount of $64,000, for a total prospective inherited amount of $8.4 trillion, according to research published in 2011 by the Center for Retirement Research at Boston College. A big challenge for many inheritors, though, is that they can be completely inexperienced with money. And with inexperience and poor – or no – planning, comes the potential for squandering a windfall.
Americans spend their inheritance shockingly fast, says Mackey McNeill, a CPA in Bellevue, Ky. “When people get a big amount of money that they didn’t earn, they feel like it’s so much money, they’ll never run out,” she says.
McNeill recounted the story of a client whose mother had died and left her about $500,000. “By the time she walked in my door, she only had half of it left," McNeill says. "She paid off some of her mortgage, bought a new car, donated some money and bought a big-screen TV for her son” while having the unrealistic expectation of being able to quit working and pay for her son’s college tuition. “You need to run the numbers before spending it," adds McNeill. "If they keep that capital and invest it, they can generate income for the rest of their lives."
2. Cashing out of your 401(k) when you leave your job
Among workers who left their jobs in 2012, 43% took a cash distribution, up slightly from 42% in 2010, according to yet-to-be-released data from Aon Hewitt, a human resources consultancy. And the smaller the balance in the plan, the more likely it is that participants will cash out when they leave. But taking money out of your plan before retirement is going to cost you; you’ll get hit with a 10% early-withdrawal penalty (if you’re younger than 59 ½) and get taxed on the sum. And possibly more serious, you lose the earnings that money could have generated.
Consider this example from Aon Hewitt of an employee who cashes out of three employer-sponsored 401(k)s over 30 years of working and retires at 65. Assume she saved 8% of her pay, got a 5% match per year, earned 3% annual salary increases on a starting salary of $50,000, and earned 7% in investment returns a year. After factoring in taxes, penalties and lost interest, she’d accumulate $189,000 in her account by age 65. If she didn’t touch the money at all, however, she’d have $872,000 – the cash-outs would have cost this saver almost 80% of her nest egg.
Upon leaving, many advisers have traditionally recommended rolling a 401(k) into an IRA, in part because IRAs offer a wider range of investment options than a typical employer’s 401(k). More recently, some employers are offering a stronger selection of investment options in their 401(k) plans, says Avani Ramnani, CFP and director of financial planning and investment management at Francis Financial in New York, but the decision to roll funds into another 401(k) or an IRA also depends on how savvy of an investor you are. If you’re comfortable selecting investment options and know how to allocate funds, the IRA offers a great opportunity. But if you’re less experienced, selecting some low cost index-based options from an employer’s plan may make more sense, Ramnani says.
3. Stopping

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