I’ve been a financial advisor for 20+ years. Through my experience, I’ve come to find some common financial mistakes people make. I would like to share the top five biggest financial mistakes with you today, so you can learn how to plan for and avoid them.
1. Trying To Keep Up With The Joneses
There has always been societal pressure to keep up with the Joneses, but it’s been exacerbated by social media. When you hop on Facebook, Twitter, and Instagram, your feed is flooded with people going on fancy vacations, driving expensive cars, and treating themselves to anything they want.
In return, you may feel pressured to buy more and do more (even if you don’t really want to). This stress to keep up with the Joneses can wreak havoc on your financial security and keep you locked in the paycheck-to-paycheck cycle.
Instead of worrying about the Joneses, focus on your own financial health. Spend your money on things that will actually make you happy. Make sure your money habits align with your values.
2. Retiring Too Early
Although sometimes beyond control, retiring too early can have major consequences if you don’t plan carefully. For example:
- Your Social Security benefits may be smaller due to fewer working years. You may also need your money at age 62 to cover retirement costs, which will decrease your monthly payout amount.
- You’ll have fewer working years to save, but you’ll need more money to support a longer retirement.
- You’ll need to find health insurance until you’re eligible for Medicare at age 65. Most early retirees elect to get COBRA coverage from their prior employer, transition to a spouse’s plan, or pay for private or public health insurance out of their own pocket.
If you’re set on retiring early, consider picking up a part-time job that offers health benefits. You’ll get to continue saving and take advantage of an employer-sponsored insurance plan, but you’ll also get a jump start on retirement.
3. Bad Investment Decisions
There are no shortcuts to financial security in retirement. It takes decades of careful planning and wealth building. Yet many people view themselves as an exception. Some may even be tempted to invest in speculative investments that promise massive growth. They chase the “hot-dot” by pouring their money into stocks that have outperformed in recent months. They watch headlines closely to time the market and stay up to date on the latest trends.
But time and time again, studies show that these investment strategies don’t work. Those who adopt a disciplined approach to investing come out ahead in the long run. Instead of focusing on the latest speculative investments, focus on building a well-diversified portfolio that aligns with your goals and risk tolerance. Leave the speculation to those that can afford to take the losses.
4. Caring For Irresponsible Kids
As a parent, it’s in your nature to want to help you kids. But repeatedly cleaning up your adult child’s financial mess can:
- Derail your retirement plans
- Create family feuds
- Promote dangerous behavior, including drug addiction and untreated mental illness
When you constantly say “yes,” your adult kids have no incentive to change. They know you’ll always be there to bail them out.
Get comfortable with telling your kids “no”—especially if helping them will jeopardize your financial future. Figure out how much you can afford to help and set expectations with them.
Divorce is a messy and complicated process. It wreaks havoc on your emotions as well as your finances. Although divorce in and of itself isn’t a financial mistake, you can make financial mistakes throughout the process. Some of those include:
- Refusing to be reasonable with how you’ll divide your belongings
- Dragging out the “discovery” process
Both of these lead to expensive legal fees. Avoid these mistakes (and save yourself a lot of money) by finding a trusted divorce attorney and financial advisor who can help you split your assets, update beneficiaries, and build a new retirement plan once the dust settles.
How We Help You Avoid These Mistakes
Any one of these financial mistakes can quickly derail your retirement, but with a little bit of planning, they don’t have to. At Fiduciary Wealth Management, we understand the complexities of planning for a retirement that may last 20 or 30 years. If you’d like help creating a comprehensive financial plan that accounts for everything life may throw at you, both now and in the future, schedule a phone call now! Together, we can help you make the most out of life’s next chapter.
About Rocklin Senavinin, CFP®
With over 20 years of experience in the financial planning industry, Roc has dedicated his career to helping individuals live comfortably in retirement and enjoy the assets they have spent their career building. He is co-founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the holistic process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long term. To learn more, connect with Roc on LinkedIn or visit www.fidwm.com. If you have questions, feel free to schedule a phone call using this link.
The views expressed represent the opinions of Fiduciary Wealth Management, LLC and are subject to change. These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial, or legal advice or service to any person.
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