Everybody makes mistakes, including financial mistakes. One of the biggest we’ve seen is not properly planning for your financial future. If this sounds familiar, the sooner you correct this mistake by sitting down with a qualified financial advisor to start working on a plan, the better.
Here are 6 common financial mistakes and what you can do to correct them:
We all have good intentions and plan to get around to saving money sooner or later. But sometimes years can go by without any serious saving. No matter what age you are or how much money you make, you can afford to save a little bit for the future. For example, “pay yourself first” by signing up for your company’s 401(k), 403b plan or starting your own IRA. If you can get the money deducted from your paycheck before you can get your grubby hands on it, your chances of successfully saving just went up drastically.
2. Having No Plan
Most people don’t need some elaborate financial plan that requires a PhD to decipher, but you do need to follow a blueprint. If you don’t know where you’re going financially, how will you know when you get there? Saving small amounts frequently over time will allow you to reach your financial goals. Whether it’s saving for college or retirement, putting away $25, $50 or $100 per pay period can add up over time.
3. Chasing Past Performance
We all want the biggest returns, right? But chasing the hot returns of last year typically results in poor performance. Why? Because many times these stocks have become trendy, pricey and overvalued. As a long-term investor, you should take a much broader approach by owning many different asset classes, both domestic and international. If your portfolio earns 6-7% annually over many years, you will be amazed by the results.
4. Meddling with your account
This is what happens when you have no plan. You start tinkering with your account, buying stocks or mutual funds that many times result in too much risk or over exposure to certain sectors of the market. The other meddling mistake many people make is taking out a loan against their retirement account. I know, it’s your money — but this option should always be a last resort.
5. Not maximizing company benefits
Many companies offer a retirement plan with matching contributions. If you just sign up and contribute something, you will receive FREE MONEY. Also, Health Savings Accounts (HSA) or Flexible Spending Accounts (FSA) can help you save taxes on your healthcare spending. So be sure to take advantage of these company benefits.
6. Investing too conservatively or aggressively
Everyone wants to earn the highest return without suffering big losses. Unfortunately, risk and return go hand in hand. Understanding your level of RISK tolerance and how you will react to market volatility is critical to long-term financial success. Typically, the more time you have to reach your financial goal, the more risk you can afford to take.
No one is immune from making financial mistakes. Educating yourself on your choices and options can help you avoid financial mistakes or limit the damage they cause. Seek the help of a qualified financial advisor to help take some of the guess work out of the equation. Together, you can create a financial plan that will greatly enhance your chances of avoiding these and other common mistakes.
NOT SURE WHERE TO START?
Request your FREE Final Approach retirement planning guide.
This guide is designed to help you understand the decisions you will need to make as you approach retirement and the factors that go into a comprehensive retirement plan. It includes:
- A checklist for transitioning into retirement
- Common investor pitfalls
- An outline of your retirement benefits
- A retirement timeline to help you know what to expect
- Key topics to consider in your estate plan
- The importance of survivor assistance
Request the Final Approach to find out how prepared you are for retirement.
Disclaimer: This blog is intended for informational purposes only and should not be construed as individual investment advice. Actual recommendations are provided by RAA following consultation and are custom-tailored to each investor’s unique needs and circumstances. The information contained herein is from sources believed to be accurate and reliable. However, RAA accepts no legal responsibility for any errors or omissions. Investments in stocks, bonds, and mutual funds may increase or decrease in value. Past performance is no guarantee of future results. Any of the charts and graphs included in this blog are not recommendations for the purchase and sale of any security.