During my 25 year career in the financial services industry, I have had the pleasure of working with more people than I can accurately count. I have seen people make some incredibly smart choices with their money. I have also seen some folks that were incredibly lucky despite their mistakes. Unfortunately, I have also seen my share of people pay dearly for their financial mistakes.
The following is a list of the 10 financial mistakes I have seen, and continue to see people make most often. This list has not necessarily been compiled in order of frequency or damage done. It is really just a list of the mistakes people make because they are busy, inexperienced, distracted, or the victims of conflicted financial advice. The good news is these mistakes are easily avoidable.
So without further ado here are the mistakes I see most often:
- People spend money without a clearly developed set of priorities thereby, missing the opportunity to build wealth. The money that would have been invested to build wealth over time instead gets spent on low priority items.
- People fail to purchase enough life insurance to properly provide for their loved ones. They tend not to understand when it makes sense to buy term insurance instead of whole life insurance.
- People mistakenly leave large sums of money "outright" to people with little or no personal financial management skills. The money usually gets squandered in a year or two. I see this most frequently with beneficiary designations for a life insurance policy.
- People grossly underestimate the true cost of retirement. Therefore, they usually don't save nearly enough to be able to live comfortably in retirement.
- People unwisely use credit cards to purchase discretionary items. This creates debt for relatively unimportant reasons. Debt is non-discretionary and must be repaid "rain or shine".
- People, far too often, invest their precious financial resources without first creating a well-thought-out plan to achieve specific goals and objectives. This usually results in a piecemeal collection of investment products with high fees and poor risk-adjusted, investment results.
- People overly rely on financial advice provided by investment "sales people". Their so called, "financial advice" is usually conflicted and self-serving.
- People have a tendency to over pay for mutual funds with "index-like" investment results. High fees makes it more difficult to achieve targeted investment objectives over time.
- People sometimes roll their 401(k) assets into a variable annuity thereby, limiting their investment options and frequently incurring excessive fees.
- People fail to think comprehensively about the risks associated with their particular lifestyle. This can unnecessarily expose accumulated assets to risk.
These are the mistakes I encounter most often. There are others worth mentioning however, I wanted to limit my list to just ten. If avoiding financial mistakes is of concern to you feel free to call or email me your questions, concerns, and thoughts.
"Enjoy life and build wealth.....you can do both. I'm Keith Donnell your Certified Financial Planner Professional."
Keith can be reached at: firstname.lastname@example.org