My clients often ask what they can do today to avoid financial challenges in the future. They might find themselves with extra income after paying off debt, have a dream to buy a home or need a retirement plan, and they're not sure where to start. If this sounds like you, keep reading so you can avoid these common financial planning mistakes.
1. Not having a plan.
In order to accomplish anything, you first need to have a plan. Begin by asking yourself where you want to be financially in five, ten or twenty years. Do you want to own a home? Do you want to be debt-free? (Yes, it is possible!) When do you want to retire? What kind of lifestyle do you want when you retire? These and many other questions are the start of your financial plan.
2. Assuming the financial professional you select today is yours for life.
Life changes, and so does your financial plan. If the person you're working with today isn't right for you, ask for referrals from trusted friends and family or the local chamber of commerce. Interview several, and select the person that best suits you, your family and your financial goals.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
3. Delaying when you start to save.
If I had a dollar for every client that came to me saying they wished they had saved for retirement from the time they graduated college, I could retire! Just $50 a month adds up over the years. If you're a parent, encourage your children to save and invest early so they don't have the stress older Americans have when it comes to having enough to buy a home, take a dream vacation or retire.
4. Assuming Social Security is part of your plan.
Our parents may be guaranteed Social Security, but don't assume the same for yourself or your children. Rather than having to fill a gap in income when you're getting ready to retire, prepare ahead of time. If Social Security is available, that's added value to your retirement plan, and if not, you've got what you need to live the way you want to live.
5. Forgetting about your ex-spouse's Social Security benefits.
If you're close to retirement age and have been divorced, you may be eligible for ex-spouse benefits. Factors such as length of the marriage, age of your ex-spouse, remarriage and current marriage status impact eligibility. The laws are constantly changing, so check with your trusted financial professional to see if you qualify.
6. Lack of communication.
Whether it means communicating with your spouse, children, financial professional or estate planning attorney, you can't be the only one who knows your financial and legal information.
You might think you're just being private, but if you're incapacitated or die, you leave loved ones stressed not knowing your wishes or where to find your estate plan where you've expressed your wishes. This often leads to family arguments, and it doesn't need to be that way. Make sure loved ones know where to find your bank, investment, retirement account, insurance and estate planning documents in the event they need to act on your behalf.
7. Neglecting to update beneficiaries.
If you've experienced a life change such as marriage, divorce or having children, you need to review beneficiaries on all bank and investment accounts as well as insurance policies. In some states, the person listed as the beneficiary trumps all other documents. That means if you forget to take your ex-spouse off a bank account, and you die, the ex-spouse is the beneficiary of the funds, not your new spouse, children, grandchildren or anyone else you might prefer to designate. That could mean there isn't money for the surviving spouse for expenses such as paying off a car or mortgage.
8. Failing to invest with an employer-sponsored retirement plan.
If your employer is sponsoring a retirement plan, find out if they match your investment. For every dollar you contribute, the company may contribute an amount up to a percentage of your salary, which means you're making money simply by participating. Make sure you understand the details before saying yes.
9. Skipping saving while you're paying off debt.
It's tempting to put all of your extra money toward paying off debt, but don't forget to save while you're doing it. Establish an emergency fund, and then think about expenses such as car repairs, new car savings and pet bills. If you don't have that money put aside, you're likely to use credit cards to cover those kinds of costs and will never eliminate the cycle of debt.
You can begin a plan for your future whether you're a young couple, ready to retire, or somewhere in between. Identifying your goals and finding a trusted financial professional are the first steps to avoiding financial planning mistakes.
Shanna Tingom is a Registered Representative, securities offered through Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC., Investment Advisor Representative, Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Cambridge and Heritage Financial Strategies are not affiliated.
-
Kohl’s to Close 27 Stores in March 2025 — Is Your Location on the List?Kohl’s is closing 27 stores this Saturday as part of its 2025 restructuring plan. Find out which locations are affected and why they’re closing.
-
Stock Market Today: It's Going to Stay Choppy for StocksAuto-focus can show us a lot about uncertainty on the ground and in the stock market.
-
Revocable Living Trusts: The Good, the Bad and the UglyPeople are conditioned to believe they should avoid probate at all costs, but when compared with living trusts, probate could be a smart choice for some folks.
-
How to Plan for Retirement When Your Child Has Special NeedsWhen your child has special needs, your retirement plan should include a plan for when you'll no longer be able to care for them yourself. A five-step guide.
-
Tax Advantages of Oil and Gas Investments: What You Need to KnowTax incentives allow for deductions and potential tax-free earnings — benefits accessible only to accredited investors in small producer projects.
-
Charitable Contributions: Five Frequently Asked QuestionsMake the most of your good intentions by understanding the ins and outs of charitable giving. A good starting point is knowing what's deductible and what isn't.
-
Taxes in Retirement: What ESOP Participants Need to KnowMost Employee Stock Ownership Plans (ESOP) participants transfer company stock to an IRA starting around age 55, so taxes on that money have been deferred.
-
Can You Be Fired for Going to Work When You're Contagious?What's an employer to do when an employee shows up at the office with a cold or the flu and spreads germs to co-workers?
-
Social Security Fairness Act: Five Financial Planning Issues to RevisitMore money as a public-sector retiree is great, but there could be unintended consequences with taxes, Medicare and more if you're not careful.
-
Social Security Warning: Five Missteps Too Many Women MakeClaiming Social Security is complicated, and for women the stakes are high. What you don't know can cost you, so make sure you do know these five things.
