7 financial mistakes to avoid

January 3, 2013 2:58:19 PM PST
The start of the New Year is a good time to get your finances in order. And it's none too soon. In a just-released survey, Consumer Reports found a surprising number of people have overlooked some of the most basic financial precautions. That can be devastating, especially when disaster strikes.

Ten years after Karen Mendelsohn and her husband, Harold, were married, he went to take a run and never came back.

"He suffered a sudden heart attack. It was horrible. And they couldn't revive him," Mendelsohn said.

The second blow: neither she nor their two young children were named as the beneficiaries on his pension. He had neglected to switch it from his parents. And when Karen asked them, they said no.

"They said if our son left us as the beneficiaries, he wanted us to have the money. It makes my heart," she said.

Consumer Reports says financial oversights are all too common.

"Our survey found that in the last five years, 86 percent of respondents had not checked or updated important estate documents, including wills and beneficiary designations," Tobie Stanger of Consumer Reports said.

Financial planner Gayle Lob says another frequent mistake couples make is having only one person in charge of the finances.

"What if somebody gets disabled? What if one of them dies?" Lob said.

Consumer Reports confirms that "money stumble" is common with married couples. Its survey found with 70 percent, only one spouse knew key details about their accounts.

"And if you are over 60 and have adult children, it's time to let them know where that important information is as well," Stanger said.

Other "money stumbles" - 50 percent of homeowners did not have enough insurance to cover full replacement of personal property at today's prices.

And more than 70 percent didn't have at least three months of living expenses set aside in case of job loss or illness.

"You may not solve everything all at once, but just taking those first simple steps may save you and your family a lot of heartache down the road," Stanger said.

As for Karen, it took a lawsuit to get her husband's death benefits. She says she hopes telling her story will encourage others to get their finances in order.

In addition to regularly updating estate-planning documents, Consumer Reports recommends designating a file cabinet or safety deposit box for your will, insurance policies, and a list of all important account and investment information.

For the complete list of 7 financial mistakes to avoid, please visit: http://www.consumerreports.org/cro/money0213

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