If you’re resolving to be better with money in 2019, it’s useful to brush up on savings tips and investing advice. But it’s just as important to know what not to do.
To get you started, CNBC Make It rounded up five money mistakes to avoid in the new year, gleaned from financial experts and self-made millionaires.
Suze Orman: Don’t go for trendy stocks
Suze Orman, personal finance expert and bestselling author of “Women and Money,” is tired of seeing millennials buy and sell stocks based on what’s hot or which companies are having a moment in the spotlight.
“The biggest mistake I think young people make when investing is that” they buy and sell because they decide, “‘This company is great, I’m going to invest in that,'” she tells CNBC Make It. If you try that strategy, “maybe you’ll hit it right, maybe you’ll hit it wrong.”
Instead of picking individual stocks, Orman recommends investing a set amount each month into low-risk options such as index funds and ETFs. Index funds are a smart way for beginners to get into the market because they’re both inexpensive and diversified. Plus, they historically earn a steady rate of return, as opposed to individual stocks, which are far more unpredictable.
David Bach: Don’t buy a new car
In many places, a car is necessary to get from point A to point B. But self-made millionaire and bestselling author David Bach says buying new is never worth the price.
“Nothing you will do in your lifetime, realistically, will waste more money than buying a new car,” he tells CNBC Make It. “It’s the single worst financial decision millennials will ever make.”
The minute you drive off the lot, your vehicle begins to depreciate in value, Bach explains. By the end of the first year, that decrease is typically 20 to 30 percent and, five years down the road, your car can have lost 60 percent or more of its initial value.
Instead, Bach recommends buying something that’s coming off a two- to three-year lease, because it “is almost brand new and you can buy it at that 30 percent discount.” A car coming off lease is often in very good condition and doesn’t have many miles on it but, because it’s not pristine, you can buy it for a fraction of the price.
Kevin O’Leary: Don’t let credit card companies get rich off you
Financial expert and star of ABC’s “Shark Tank” Kevin O’Leary says that paying high interest rates on your credit card balance “is crazy” and should be avoided at all costs. In fact,he tells CNBC Make It, the biggest mistake young people make is “the assumption that debt is free.”
“People use credit cards in a way that’s really extraordinary,” O’Leary continues. “They assume that it doesn’t cost anything to put anything on credit.”
Failing to pay off your balance every month can cost you. In October, CNBC reported that the average credit card interest rate spiked to 17.01 percent from 16.15 percent a year earlier and 15.22 percent two years ago.
To avoid paying astronomical amounts in interest, O’Leary recommends a “very simple” solution: “Don’t spend more money than you bring in.”
Danielle Town: Don’t let saving cost you money
If you’re just saving and not investing, you’re setting yourself up to lose money in the long run, says Danielle Town, author of “Invested: How Warren Buffett and Charlie Munger Taught Me to Master My Mind, My Emotions, and My Money (with a Little Help from My Dad).”
That’s because inflation causes prices to rise, which makes money less powerful over time. While a $20 bill will always be worth $20, what you’re able to buy for that amount dwindles.
If you had stuffed $1,000 in cash under your mattress 50 years ago, today it would have the same buying power as only $137.45 did in 1968. However, that same amount invested with compound interest would have grown to about $20,000, assuming a 6 percent rate of return.
Although experts advise having three to six months’ worth of living expenses stashed away in a liquid savings account, once you have that, it’s smart to put any extra cash to work. “The antidote to losing money on inflation is investing,” Town says. “You’ve got to do something with your money.”
Barbara Corcoran: Don’t forget closing costs
When buying a home, it’s crucial to make sure you’ve saved up enough cash first — and that means covering more than just the down payment. “The biggest mistake that first-time homeowners make is they forget that they need closing costs,” says self-made millionaire Barbara Corcoran, who made her fortune building a real estate empire worth $66 million.
Closing costs, which can include property taxes, homeowners insurance, inspection fees and application fees, can add an additional 2 to 5 percent of the total cost of the home onto your final price. That means you’d owe anywhere from $4,000 to $10,000 extra on a $200,000 home.
Be sure to come prepared or you might not be able to close on your dream house.