10 Things not to do with your money

1. 1.       Don’t finance your child’s education with retirement savings

Alexey Bulankov, a certified financial planner for McCarthy Asset Management in Redwood Shores, Calif., says, “You can finance your child’s education, you cannot finance retirement.” Look into every possible avenue to finance your child’s education, including student loans, grants, scholarships and work internships, which are offered at some private colleges. It’s possible your child may not get to attend the college he or she would like, but it’s important that your retirement savings not be touched. There’s little room for “do-overs” for your financial security at this point, the experts say.

1. 2.       Don’t spend on impulse, make a budget

You need to calculate how much money you need every month. You should have a clear idea as to where your money goes. A good planning and budgeting on household and other expenses will help you control your finances. Identify your wants and needs and make a clear choice. Always keep an account of what you are spending on.

1. 3.       Don’t use IRS like piggy bank

Don’t use the IRS like a piggy bank. There is no reason to take your hard-working money out of commission. Just think, if you’re annual refund is $1,000 that means you could increase your take – home pay by more than $83 a month.

1. 4.       Don’t try to catch up by raising the risk level.

With portfolios taking hits amid the market turmoil, many boomers facing emotional distress may be compelled to chase riskier assets classes much in the same fashion gamblers double their bets in attempt to break even, says Guy Penn, principle founder, G.M. Penn Wealth Management in O’Fallon, Mo. “During times of market instability, it is more important than ever to maintain a long-term outlook and stick with a prudent investment strategy.”

1. 5.       Don’t invest for the short term, think ahead

When you are investing, forget about short-term goals. Set investment goals for at least 5-10 years so as to make the most of your investment. Equities can offer returns ranging between 15-20 per cent annually. Rather than leaving your money idle in savings account, you can opt for flexi-deposits, where banks transfer the idle money to the term deposit. However, if you are looking at short term savings, you can opt for postal saving plans, government bonds, and mutual funds. For long term plans, public provident funds (PPF), life insurance, long term bank deposits will be beneficial.

1. 6.       Going to the mall

For some reason, when we get a check from Uncle Sam, some of us act like we won the lottery. This isn’t “found money” — it’s your money. If you didn’t need new clothes before you got your refund, you probably don’t need any now.

1. 7.       Hoarding Money

Children of the Depression did a lot of this — stuffing $20 bills in their bibles or balling up tinfoil and rubber bands so they wouldn’t have to buy more. But planners say that this is often a problem with wealthy and responsible older folks today: They’re so afraid of running out of money that they don’t enjoy the money that they have.

“When people deny themselves things that they could clearly afford, you have to ask them what they’re saving that money for,” Tarbox says. “We have to tell them that they’re not spending enough.”

If you’re worried about running out of money, sit down with a financial planner and work out the math. Make sure you consider worst-case investment scenarios, not just the averages. That will make you more comfortable about weathering a bad patch like the one we just muddled through. Then, if you still have more than enough, make a plan that will allow you to enjoy your wealth by either spending the excess or giving it away.

1. 8.       Make Sure Your Money is Safe

The federal government recently raised the amount of deposits per person per institution that it will guarantee to $250,000 from $100,000. But it had been discussing a limitless guarantee. So don’t be confused. More important, this is a temporary bump in coverage that may last only through the end of 2009. So if you consolidate deposits in a single institution you may have to reverse the process in little more than a year. To keep things simple just play by the old rules — keep no more than $100,000 in any one institution, at least until it becomes clear that the higher limit will be made permanent.

1. 9.       Never invest blindly without a true plan.

Kadish says that everyone seems to have a financial planner, but no real plan. “Know your objectives and how much you need to invest to make those goals,” he advises.

1. 10.   Don’t go for too many loans

When you don’t have money to upgrade your lifestyle, you may opt for a car or home loan. Ideally, you must not go for too many loans at the same time. Buy things one at a time so that you have enough money for yourself and to save and you are not too indebted. Don’t spend too much with your credit cards. Try and pay your credit card dues as soon as you can. If you carry forward the outstanding dues, it will turn out to be a huge burden.