Avoid these 5 Common Mistakes with Financial Planning
By Kathleen Monday February 15, 2016 No Comments
Comprehensive financial planning involves setting small goals and living within personal means. With an eye on the future, wise asset management will ensure a comfortable future. It’s easy to make mistakes, however. Even small errors can have a big ripple effect, interfering with goals and projections. By avoiding these missteps, consumers can protect their future wealth.
Failing to Plan
Achieving a goal requires research and planning. Without these steps, reaching a goal is unlikely. Consumers can calculate savings needs using tools designed for this purpose. After calculating the money needed to achieve the desired retirement, the next step is making a plan to achieve this goal. Achieving a specific retirement lifestyle must include concisely defined goals and a step-by-step written process.
Consumers have two choices for prudent asset management—they can save for retirement, or they can spend their retirement savings during their working years. People who do not save enough for retirement are actually choosing to spend the money they would have had in retirement instead of saving it. Inadequate saving is often a matter of priorities. Revamping priorities during the working years may provide the vision necessary to see the importance of saving to ensure comfort in the golden years.
Relying on Unreliable Resources
Anyone with a company pension plan may find it tempting to rely on this resource as a trustworthy source of income. In addition, consumers often wish to rely on Social Security as a means of support after they stop working. However, these sources of income are not guaranteed. Current financial trends make it evident that consumers must take personal responsibility for income during the golden years instead of relying on potentially unreliable resources.
Unrealistic Estimation of Health Care Costs
It’s often tempting for people to want to rely on Medicare to cover medical services. However, current conditions require self-insurance in many situations, as well as out-of-pocket expenses. Inflation is also causing significant increases in health care costs.
Tax-Qualified Retirement Plans
Maintaining high cash balances in tax-qualified retirement plans is often ill-advised for people younger than age 59.5. Accessing this cash will incur early withdrawal and tax penalties, negating many benefits of cash liquidity.
Comprehensive asset management with an expert financial planner should help consumers avoid these costly errors.