Happy Financial Planning Month! In our last post we talked about what you can do to take a more active role in your financial life. This time, we will focus on the most common financial mistakes and misconceptions people have at every stage, and how you can avoid them.
Believing only rich people work with financial planners.
It’s a common myth that financial planners are very expensive, or they only work with wealthy clients. The truth is, regardless of what stage of life you’re in, you can probably find a financial planner who will work with you. Financial planners target different types of clients, so while some work exclusively with the very wealthy, there are others out there who work with people just starting out. Whether you’re paying down debt, growing your portfolio or planning for retirement, a financial planner can be an invaluable tool for your money situation. It’s important to be honest about your budget and be willing to communicate your goals when you’re seeking out a financial planner.
Keep your savings at the bank
Many people are risk-averse, especially with their savings. But if you don’t take on some risk, you’re going to miss out on some hefty returns. Young people in their 20s and 30s can stand to put a significant portion of their savings in stocks. Contrary to popular belief, even people in retirement should put a percentage of their retirement savings in stocks. Your retirement can last decades, so it pays to keep investing.
Not having a plan for your money.
We covered this in detail in the last post, but it’s an important to drill home. In order to make a long-term plan for your money, you first need to know where your money is going and where it’s coming from. Without that, you’re essentially flying blind. Once you have a grasp on your cash flow, it’s time to allocate those dollars with purpose. What do you need to save for? How much do you plan to save? What debts do you need to tackle? Living paycheck to paycheck without taking stock of where you are is a bad habit that can cost you enormously over time.
Staying financially ignorant
Seeking professional assistance in your finances is a smart move (see # 1.) Seeking the outside opinion of someone who helps people with their money for a living can turn your entire financial situation around for the better. But that doesn’t mean you shouldn’t play a role in your wealth. Make an effort to educate yourself at every stage of life so you can make informed decisions. Working with a financial planner will be a much more rewarding experience if you are able to provide your own educated opinions and goals. Working together will be far more effective than dropping your money situation in their lap and leaving it totally in their hands. The more you know about reconciling your financial past and investing in your future, the better off you will be.