Whether you took on a car payment you couldn’t afford when you were younger or you fell behind on your financial goals by taking on debt, everybody makes financial mistakes sometimes. After spending over a decade working in the financial services industry, we have seen common mistakes people make that have detrimental effects on them down the line. Let’s break down some of the biggest financial mistakes we see people make so you can avoid them.
Every single financial product comes with some degree of risk—even a simple savings account is subject to inflationary risk, which means your savings loses value as the value of the money drops. Some investors are quite conservative and don’t like to take on too much risk. Although taking it safe feels like the logical, pragmatic thing to do, you could be missing out on enormous gains. Shying away from more risky investment vehicles like stocks could result in painfully slow growth.
Likewise, dumping your life savings into trendy cryptocurrency a couple of years in your mid-50s can completely cripple your retirement savings. Finding the appropriate amount of risk for your age, income, goals, and specific circumstance is key to making the most out of your money without exposing yourself to too much uncertainty.
Not having a plan for how to earn income during retirement is another common mistake we see with clients. Just like with knowledge, investing and saving for retirement is only part of the equation. Most people focus on how they need to prepare for a comfortable retirement and often neglect planning for what happens after they retire. Your income plan during your retirement years will also play a major role in how long your money will last.
A well-developed retirement plan should include both guaranteed income, such as a pension or Social Security, and investment income, such as real estate or income from your retirement account. Another important aspect to your plan is determining the timing of withdrawals. For instance, you can start withdrawing Social Security at age 62; however, if you delay taking benefits until you are 70, your benefit amount will increase. Assets like 401(k) plans, Roth IRAs, and annuities are each taxed differently. Timing your withdrawals wisely from each type of account can help reduce your overall tax bill.
When it comes to insurance, you don’t want to wait until you need it and then wish you had it. Accidents can happen to anyone at any time—not carrying adequate life insurance and disability insurance could have devastating consequences. It is heartbreaking when vulnerable family members find out their spouse or parent wasn’t carrying adequate insurance. In worst-case scenarios, homes are foreclosed on, family businesses have to be sold, or bankruptcy is declared. You can avoid these devastating consequences by purchasing adequate life and disability insurance before the worst happens.
Estate planning is a crucial aspect of a comprehensive wealth management plan, especially if you want to pass significant assets to the next generation, or properly plan for the succession of your business. Without a proper plan, your family could have to pay expensive probate fees and court costs as the government determines what to do with your estate. And probate processes are public information, meaning that creditors or even estranged relatives could have access to information regarding your wealth, and challenge your family’s rights to it.
An estate plan ensures that your assets are allocated to the family members or close friends you’ve chosen. An estate plan can also execute charitable donations you plan to make, business succession plans, and guardianship designation if both you and your spouse should unexpectedly pass away.
Like disability insurance, most people can’t fathom not being able to fully take care of themselves. But the sad reality is, roughly two-thirds of today’s 65-year-olds will need some kind of long-term care support. (1) Whether it’s needing someone to help you around the house or living at a nursing home with around-the-clock care, the costs of any long-term care can quickly add up. Planning ahead of time to cover your long-term care costs can keep you from exhausting your savings or placing an extra burden on your family.
Whether you’re a teacher, doctor, business owner, or any other kind of professional, you likely don’t have time or simply don’t want to learn about the ins and outs of personal finance. Reaching out to an experienced financial professional can help you gain confidence in your financial future and can help you avoid the mistakes mentioned without having to do all the research yourself.
At Wealth Advocate Group, we are dedicated to helping you protect and grow your wealth by offering quality financial advice and asset management services. If you want to learn more about the value of partnering with a professional, call 440-505-5704 or email jbrown@Wadvocate.com to schedule an appointment.
John Brown is a wealth advisor at Wealth Advocate Group, LLC, an independent, fee-based wealth management company. With over 10 years of experience in the financial industry and a background in accounting, John provides sophisticated and specialized services to his senior executive clients who need the expertise of someone well-versed in concentrated securities, stock options, and restricted stock strategies, as well as the risk and tax burdens that come along with their compensation. John has a bachelor’s degree in accounting and financial management from Hillsdale College and is a CERTIFIED FINANCIAL PLANNER® professional. John is known for his thorough approach, often asking questions and bringing up details his clients have not considered. He strives to address every piece of his clients’ financial picture to make sure they are on the path toward their goals and financial confidence. In his spare time, John and his wife, Christina, enjoy traveling and staying active. You can often find him spending quality time with his friends and family. To learn more about John, connect with him on LinkedIn.
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(1) https://acl.gov/ltc/basic-needs/how-much-care-will-you-need
