I saw a report recently that two out of three of us say that they’ve made at least one really bad financial decision. So if you’ve made some financial boo-boo, don’t feel bad. You’re part of a very large crowd. However, there are some financial mistakes you can avoid just by knowing what they are.
#1: Not maintaining an emergency fund
You need to have the equivalent of about 6 to 12 months of living expenses. That way, if you run into a financial storm, you will have the money to ride it out without having to dip into your investments.
#2: Being too optimistic in your financial planning
It used to be that when you did your financial planning, you could expect an average 10% return on your investments. Those days are long gone. When you make assumptions today about future returns on your investments, it pays to be conservative.
#3: Paying too many unnecessary fees
You put yourself at a disadvantage if you purchase investments that come with big fees. In fact, if you stick to no-commission index mutual funds, you’ll enjoy about a 1% to 2% advantage over people who invest in funds that carry a sales charge.
#4: Letting your emotions rule
We tend to be driven too much by the emotions of greed and fear. When the market is at the top, we often assume too much risk. On the other hand, when the bottom of the stock market falls out, we fall prey to fear and want to sell everything. You can prevent this emotional roller coaster by creating and sticking to a diversified portfolio that spreads out your risk across different classes of assets.
#5: Too little or too much insurance
If you’re not careful, it’s easy to end up with either too much or too little insurance coverage. You can quantify your insurance needs by using a life insurance calculator like the one you will find at www.life happens.org/life-insurance/life-calculator.
#6: Taking too big a risk
Investing can be like gambling. If you decide you want to make a risky investment, allocate only the amount of money you’re willing to lose – or an amount that won’t have a seriously negative affect on your financial life long term.
#7: Failing to request help
You might be willing and able to manage your own financial life. But there are cases when it’s better to hire a pro. Before you do so, make sure you know what services you’re paying for and how you will compensate your advisor. As an example of this, if a financial advisor works on commission, he or she might have an incentive to sell you one product over another – even if it’s not in your best interest. A better answer is to hire an advisor who works on a fee and who will adhere to the fiduciary standard, which is that he or she is required to act in your best interests.
#8: Not dealing with your debt
If you’re carrying a big load of debt, you need to deal with it. The interest you’re paying probably far exceeds anything you’re earning on your investments. Our debt consolidation providers offer a simple 100% Satisfaction Guarantee. We’re so confident that we can help you achieve your goal of becoming debt-free in a reasonable time, that if you are ever unsatisfied with our recommended debt relief programs you can cancel at anytime without any penalties or fees. And they usually save their clients thousands of dollars to boot.
Call our toll-free number today for more information or fill in the form at the top of this page. You won’t be sorry you did.