How Default Settings Can Derail Your Finances
NEW YORK ( MainStreet) "Kicking the can down the road." If I hear that phrase one more time...
That's how (a lot) more than one commentator described the debt dodge our U.S. government recently completed. Deciding not to make a decision, but just dealing with the whole mess later.
We all do it. Choose not to think about something important that we really need to consider, especially when it comes to finances. And that's when we decide to let it ride. Leave things as they are and kick the can down the road. In this case, default is not about neglecting to pay your bills; it's about maintaining the status quo. Default settings can mean doing the least required for any given task at hand.
Computer configuration? It's in the default mode. Lunch? I'll have what he's having. Ringtone? Factory setting. Shirts? Off the rack. Vehicle? Stock model, standard options.
Sometimes we're too busy, unaware, uninformed or uninterested to make a decision. So we pay more, lose more, make less and save less. Maybe it's time for all of us to stop kicking the can. Consider taking your finances out of the default mode and doing more. Here are some common auto-pilot decisions we make:
Everyone knows about this one, but it's still a common mistake: paying the minimum required on credit cards. Congratulations. That new pair of shoes will finally be paid off in 2021. Think they'll still be in your closet by then?
Bank of America offers an example of a credit card balance that requires a $37 minimum payment. By paying just $10 more than the minimum required, and continuing to do so until the balance is paid off, you'll save $1,236.76 in interest and pay off the debt almost 10 years faster.
Contributing to your company retirement plan is one thing; good job. But did you decide how to invest your contributions or did they just drop into the plan's default investment bucket? If so, your retirement dollars could be sitting on the side of the road looking for a ride when the market makes its next big move. Get good advice and make sure your 401(k) money is invested appropriately to meet your retirement goals.
A higher deductible on your car insurance means you'll pay a lower premium. But it also means more money out of your pocket when you file a claim. Kiplinger says raising your deductible from $250 to $1,000 can lower your premiums between 15% and 25%. That's certainly worth considering. It all depends on the value of your vehicle and the amount of money you're comfortable with having to round up when you smash that rear quarter-panel.