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A widowed mother of two nearly lost out on $100,000 because her husband failed to update the beneficiary designations on his retirement plan after they married.

Not updating wills and beneficiaries is one of the “7 money stumbles to avoid” featured in the February issue of Consumer Reports.

“Nobody’s perfect.  Everyone makes money mistakes, and some might be unavoidable in times of financial distress,” said Tobie Stanger, Consumer Reports senior editor. “But missteps or miscalculations can cost you a lot over the long term or inadvertently hurt your family when you’re gone.”

Consumer Reports conducted a nationally representative survey about Americans’ money habits and uncovered several common and insidious blunders that could cause significant financial, and sometimes emotional, pain.

• Not updating wills and beneficiaries. Eighty-six percent of Americans hadn’t updated their wills or other estate-planning documents within the previous five years. But even if nothing has changed in your life, every year you should check your beneficiary designations in your will, insurance policies, investment accounts, and retirement plans to ensure your investment company, life insurer and employer still have the proper information.
  
  
• Not sharing information with family. In only 30 percent of households did both spouses know major details about the family’s finances and where to find account information. Any easy solution is to designate a safe, file cabinet, or safe-deposit box to hold all important documents and account-access information.
  
  
• Messing up on 401(k)s. About two-fifths of respondents set aside 6 percent or less of pretax income in defined-contribution retirement accounts, most likely missing out on free employer matches. Ninety-one percent never reviewed fund expenses within their plans, though those expenses play a major role in investors’ returns. Fortunately, it’s easer than in the past to compare funds’ expenses. As of last year, 401(k) plans are required to send statements to investors outlining marketing and fund management fees.
  
  
• Underinsuring your home and your life. When Hurricane Gustav blew two trees onto the Baton Rouge, La., home of Denise Porter and Richard Hannon in 2008, the two assumed their homeowners insurance would pay to replace the roof and repair two damaged rooms. But their policy paid only the actual cash value of their property—that is, the replacement cost of the property minus depreciation. And they faced repair bills in the “tens of thousands,” Porter estimates. To economize, they’d also failed to get policy features that would cover the cost of bringing the home up to new building standards and provide for inflation in the cost of materials. “We were shortchanging ourselves,” Porter admits.

  Only 36 percent of homeowners told us they’d purchased replacement-cost coverage, a more expensive homeowners insurance that provides replacement of your home with like kind and quality materials. And only 20 percent have umbrella coverage against liability claims.

  Since settling their claim, the couple sold that property and bought a new home nearby. Now their homeowners policy includes coverage for inflation protection and to rebuild up to code. To reduce their premium, they’ve raised the deductible to $1,000 per incident from $500. They have a separate, state-sponsored wind and hail policy, with a deductible of 2 percent of the home’s insured value when the loss is caused by a hurricane.

  The couple also bought federal flood insurance, at about $350 a year, though their home is not considered to be in a flood-prone area. The Federal Emergency Management Agency estimates that more than 20 percent of all flood claims arise outside of high-risk areas.

  Two other coverages that should not be overlooked are life and disability insurance. Term life insurance is more economical than other types. Planner Losey says working parents of young children should buy at least 10 times their incomes, but he and planner Blayney recommend talking to a certified financial planner for a more sophisticated estimate. Use an online broker such as Accuquote, SelectQuote, FindMyInsurance, or LifeInsure.com to compare premium quotes.

  Your income is your most important asset, but injury or illness could put it at risk. So if your employer offers supplemental long-term group disability insurance, buy it. A supplemental group policy that raises coverage to 70 percent of income from 40 percent could cost you on average $150 to $200 a year, says the Council for Disability Awareness, an industry group.

• Not preparing for emergencies. Porter mentioned another measure she and her husband have taken. Because both work in relatively fragile businesses—Porter, 42, sells hand-sewn crafts, and Hannon, 48, works for a newspaper—the couple have prioritized saving for a rainy day. Their emergency account holds about a year’s worth of living expenses.

  But most Americans don’t save even half that much. Among our survey respondents only 29 percent had an emergency fund that could cover three to six months of expenses. In a period of prolonged unemployment, that cushion could be a lifesaver.

  Saving a bit at a time—say, $20 a week—can help build your cash buffer. That money should go into an accessible bank or credit-union savings account.

• Ignoring your credit report. Consumers can obtain a credit report from each of the three major credit bureaus—Equifax, Experian, and Trans­Union—free through the industry’s official website, at annualcreditreport.com. To most efficiently monitor your credit, we recommend staggering your report requests to one every four months. But our survey showed that more than four out of five people—81 percent—don’t bother checking their credit reports.

  Given that identity theft is the fastest-growing crime in the country, we think that’s a mistake. Consider what we heard from a North Carolina doctor who discovered that her office manager had embezzled at least $500,000 from her practice by using, among other ruses, credit cards taken out in the practice’s name. The doctor and her husband later realized that they could have stopped the fraud if only they had checked their free credit reports. But because they hadn’t needed to borrow in years, they never bothered.

• Mismanaging debt. Credit cards generate among the most expensive type of consumer debt; the average interest rate is about 14.3 percent, according to LowCards.com, a credit-card comparison website. In spite of those lofty costs, almost half of our survey respondents with credit cards said they carry a balance on their cards. Eight percent reported at least one late payment in the past 12 months. Almost one-fifth—18 percent—said they’d accrued a balance of $10,000 or more.
  

  Worse, 13 percent said they paid only the minimum due each month. That’s a strategy that could chain you to your debt for decades. Assuming an interest rate of 18 percent, it’d take 24 years to pay off a $2,000 debt with minimum payments.

  To begin to free yourself from that balance, consider consolidating your debt with a home-equity line of credit; rates on ­HELOCs average between 4 and 5 percent, according to Bankrate.com. If you don’t own a home or lack sufficient equity or income to qualify for a ­HELOC, consider transferring your balance to a lower-cost card. Many cards offer 0 percent financing on balance transfers for 12 to 18 months, after which the rate will jump to between 12 and 22 percent. You also might have to pay a fee of 3 or 4 percent of the balance up front.

  Focus on retiring your debt by paying more than the minimum due each month. To that end, put the entire amount you’ll need each month to pay down your credit cards into a separate bank account so that you’re not tempted to use it for something else. You can even arrange for the sum to be direct-deposited from your paycheck.

  Jim Henry, 70, a retired health-care executive from Jacksonville, Fla., says he began employing his form of debt management 23 years ago. Burned by a bad business deal and sitting on $50,000 in credit-card debt, Henry began tracking his family’s spending to bring their finances back from the brink. Within about four years he had eliminated the credit-card debt—and he hasn’t kept a balance since. Today, he estimates his net worth to be “north of $1 million.”

  Just 35 percent of our survey respondents say they have a budget, but maybe more ought to. “When I look back, it helped me keep an eye on where I was financially,” Henry says. “If you just stick to basics and common sense, you can be OK.”