By Gary Cassell
I’ve been a financial advisor for 25 years, which means I’ve seen a lot when it comes to financial planning. Though everyone’s financial situation is unique, there are several financial mistakes I’ve seen many people make throughout my career. Here’s my list of the biggest financial mistakes people make and what steps you can take to avoid them.
Lack Of Planning
Reaching major financial goals such as buying a house, paying for your child’s college education, or retiring with a healthy nest egg doesn’t just happen. Achieving these milestones only comes after years or even decades of planning, saving, and investing. Sit down and decide what steps you can take today to put money away for these future goals.
Not Understanding Risk
Many investors who say they can handle market volatility end up panicking and selling all their investments at the first sign of a market drop. By doing that, they “lock in” their investment losses, and then often don’t reinvest into the market until prices have risen considerably. Before investing, test your tolerance for risk to ensure you’re not taking on more than you’re comfortable with.
Carrying Too Much Debt
Many of us are encouraged to take on debt to reach goals such as going to college or buying a house. However, don’t take on so much debt that you’re crippled making large payments on your obligation for years, limiting what you can save for the future or spend on other items. Instead, consider other options, such as buying a smaller house or seeking out scholarships or a cheaper college option, to save yourself the burden of a heavy debt load.
Lacking An Emergency Fund
You may make enough money to cover your monthly bills. But what happens to your budget when the roof leaks or the car needs new tires? If you’re like many people, you put that expense on your credit card, which you then spend months paying off. Consider building an emergency fund that you only touch in case of unexpected expenses or to replace your income in case of a job loss.
Spending Too Much
Do you reach the end of each month wondering where all your money went? Spending beyond your means is one of the biggest factors that can keep you from reaching your financial goals. Consider tracking every dollar you spend for a little while, even just a week. It may open your eyes to how much you’re spending on incidentals like lunches or coffee. If that’s not the problem, then you may have to trim your spending in bigger ways, like rethinking your car payments, housing costs, or what you spend on travel.
Not Updating Beneficiaries
When you obtain life insurance or open a retirement account, you need to choose a beneficiary to receive the funds. However, it’s important not to set it and forget it for this important directive. Consider checking all the beneficiaries for your various accounts at least once a year. Your circumstances of who you want to leave your money to will likely change if you get married, get divorced, or experience another big life change. Similarly, don’t name a minor such as your child as a beneficiary, as minors cannot directly receive the proceeds of a life insurance policy or retirement account.
Lacking Estate Planning Documents
Though it’s not a topic most of us want to dwell on, it’s critical to have the necessary estate planning documents created and kept up to date. A will ensures that your assets are divided the way you prefer, instead of forcing your family members to guess at your wishes. If you have substantial assets, you may consider the benefits of a trust, which can provide tax savings and put conditions on how your assets are distributed. If you fall ill or become incapacitated, a health directive will let family members know your wishes regarding healthcare, while a power of attorney allows someone to take control of your finances if needed, including paying bills. Consult a trusted attorney for help in drafting these documents.
Avoid Making These Mistakes
Many of these mistakes can be avoided with the help of a financial professional. If you aren’t already a client, I’d love to hear your story and share how I can help. If you already have a plan and want to make sure that it’s still right for you or if you are ready to start taking control of your financial life, I encourage you to reach out to us at Premier Wealth Advisory Services by calling (636) 532-7337 or scheduling a consultation using our online calendar.
Gary Cassell is president of Premier Wealth Advisory Services, an independent, fee-only wealth management firm. With over 25 years of experience in the financial industry, Gary is passionate about helping families, business owners, and executives live their lives by design, not by default, through personalized wealth management and unparalleled service. Gary earned a bachelor’s degree in physics from Hastings College and is a long-time resident of St. Louis, where he lives with his beautiful wife and two wonderful children. When he’s not working, you can find Gary spending time with his family, hiking, playing tennis, walking, and brewing beer. To learn more about Gary, connect with him on LinkedIn.