Five Money Mistakes

Don’t Make These Five Money Mistakes
With Your Money as You Plan For Retirement

If you want to listen to the podcast version with CERTIFIED FINANCIAL PLANNER™ professional Justin Pitcock, who discusses the five common mistakes people make regarding their finances, click here.

Five common mistakes to avoid when it comes to your finances:

  1. Don’t wait to save for retirement. Prioritize your long-term financial goals and pay yourself first. Early retirement planning is essential regardless of your current age. It’s never too late to change your habits and budget more effectively for your future. Don’t give in to the misconception that saving for retirement can wait.
  2. Don’t neglect emergency savings. It is essential to set aside cash for unforeseen expenses like car repairs, medical bills, and home repairs. To avoid falling into debt traps you should build an emergency fund based on covering deductibles as well as maintaining several months’ worth of expenses. We recommend at least $10,000 as an emergency fund and then work up to saving 3-6 months of living expenses. This will ensure you don’t go into debt again when accidents and unforeseen events occur. Once you use a portion of your emergency fund, then you will need a strategy in place to replenish it.
  3. Avoid debt traps. One easy way to avoid falling into debt traps is through responsible management of major purchases like cars and homes, ensuring purchases fall within reasonable budget percentages. One method to reduce and eliminate debts is the so-called “debt snowball method.” The snowball method is a strategy to pay off debt by paying off the smallest of all your loans or credit cards first, while making the minimum payments on the other debts. Once that smallest debt is paid, you take the money you were putting toward that payment and roll it (add it) toward the next-smallest debt owed. You continue this process until all accounts are paid off.
  4. Avoid the cash trap. The Fed is signaling two to three rate cuts this year, starting in June 2024, and three rate cuts in 2025. Money market, CD, and other cash alternatives pay an attractive yield of around 5% right now, but that will likely come to an end soon. Don’t let these attractive cash yields trick you into investing in them for your long-term goals. Economics 101 teaches us that when interest rates fall, asset prices rise. In other words, the stock and bond market will likely increase significantly when interest rates drop. Creating savings accounts for short-term purchases and your emergency fund is a good idea. However, when planning for retirement or other long-term financial goals, it is generally better to put your money into an investment fund tailored to your risk tolerance, age, and individual financial goals.
  5. Don’t let fear keep you from investing. Don’t overlook valuable investing opportunities due to fears of market volatility and misconceptions about investing being akin to gambling. Proper investing in securities over time is vital for long-term financial growth. Take time to clarify your individual goals and align your investment strategy to meet them. Proper planning can help you achieve financial security. You can always adjust your strategy over time. Consider creating a retirement plan that is specific to your situation and goals and talking about your plan with your financial advisor. Having an advisor who supports your goals and listens to your concerns can help you stay the course amidst market fluctuations induced by media fear tactics.

If you want an expert who can give sound advice and help you navigate how to invest your wealth and plan for your retirement, reach out to us to schedule a quick call. One of our CFP® professional wealth advisors would love to discuss your individual goals and options with you. The first step in our process is to schedule a free 15-minute intro call with our Goodwin Investment Advisory consultant here.

All investment carries risk, and past performance does not guarantee future results. The information above is based on our current information and experience, and may change and may not apply to your situation. Please contact us for more information, or to discuss your unique situation.

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By Published On: July 9th, 2024

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About the Author: Tara Bruce

Tara Bruce
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