Two Money Mistakes that Could Cost You $1,000,000

Consumer Reports' piece on 12 money mistakes that could cost you $1,000,000 (February issue) should really be called 2 money mistakes that could cost you $1,000,000, a couple others that are expensive, and eight additional ideas thrown in just to round out the article and make it look "big."

We'll take these in groups -- here are the two that could cost you $1,000,000 and what CR says you can do about them:

• Investing too conservatively during retirement. Cost: $360,000 to $750,000. What you can do: Weight your asset mix as heavily toward stocks as your comfort level allows. If all-stock gives you the willies, consider, for example, an 80/20 or 70/30 stock/bond mix.

• Retiring before you need to. Cost: $237,000 to $309,000. What you can do: If you're in good health and have a choice about when to retire, try to wait until full retirement age.

Yes, retirement isn't what it used to be. Gone are the days where you had 5 years of bliss, living off a small savings and the income generated from it. Now if you make it to retirement age it's likely you'll live at least a decade longer, probably more. As such, you need to save more, invest more aggressively, and work as long as you can. Mess any of these up and it could cost you in a big way.

Related Free Money Finance posts to check out:

• Can't Afford Retirement? Move to Mexico

• 401k Match Trumps Debt Repayment

• How to Retire Early

Next, here are CR's two items that are pretty expensive:

• Launching a divorce war. Cost: $49,000 to $188,000. What to do: Work more toward diplomacy than war, which will increase the viability of the low-cost mediation option.

• Underinsuring your home. Cost: $16,000 to $194,000. What to do: Ask your insurer to reassess your home's replacement cost and adjust coverage accordingly. Buy an inflation-guard endorsement. Make sure your policy would pay to rebuild to the current housing code where you live.

No doubt about it -- divorce is expensive. If you can get along enough to divide things in a civil manner, you'll save a ton of money. On the insurance front, a simple call to your agent is all you need to make to confirm proper coverage:

Related Free Money Finance posts to check out:

• Solve Marriage Spending Differences by Having a Personal Account

• The Relationship Between Money and Sex

• Unhappy Couples Staying Married Because of Money

• Big Money Blunders to Avoid: Getting Divorced

• 12 Ways to Save on Insurance

And here are the "other eight" to round out the piece. I'm just going to list the items and their costs since most of the "what to do's" are rather common sense:

• Overpaying for your mortgage. Cost: $27,000
• Carrying a credit card balance. Cost: $5,000 to $23,000
• Maintaining an unhealthy lifestyle. Cost: $4,600 to $42,000
• Ignoring Roth accounts. Cost: $9,000 to $26,000
• Cashing out your 401k. Cost: $6,000 to $17,000
• Underfunding your 401k. Cost: $36,000
• Paying needless fund fees. Cost: $4,000
• Falling for a scam. Cost: $100 to You-name-it.

Like I said, avoiding these are pretty easy (for the most part.)

Comments

[FS]

Here's one I'd add to their list: Buying new vehicles on credit. Paying interest on a rapidly depreciating asset is a real double-whammy! My advice: Save money, buy a bottle of "new car" scent to go with a new-to-you used vehicle.

[TheJapChap]

Well said, FS... Couldn't agree more. I read this CR article a few days ago and came to the same conclusion as FMF. They really weren't reinventing the wheel here--served up a flashy title for its cover page, though!

[fathersez]

I have to plead guilty to some of the items in your list.

The only consolation is that they are in your "last eight".

Thanks for pointing them out.

[briang467]

Of course, if you skip "maintaining a healthy lifestyle." you not only pay with your money, you may also get to pay with your life. But it does make retiring early easier, since you don't have to pay for many years of retirement.