Published by Ryan Cooley
As a wealth advisor, it is my duty to educate my clients as much as possible so they can avoid financial pitfalls and enjoy the fruits of their wealth. While every client’s situation is unique and treated as such, I have noticed a common thread among my clientele in terms of common financial mistakes I see.
Here are the four most common:
1. Trying To Time The Market
Keeping track of the market is generally a good idea as it keeps you aware of the current state of the economy. On the other hand, figuring out when to make an investment by attempting to time the market is not a wise decision. Take the 2008 Housing Bubble Crash, for instance. The value of homes and mortgage interest rates kept creeping up with no end in sight. People were doing anything they could to buy their dream home (e.g., taking on unsustainable loans or rushing to buy even when they faced huge monthly payments), fearing that if they didn’t buy soon, the prices would continue to rise. In the end, many homeowners found themselves “underwater” in homes that were worth less than what was owed.
Do not make investments based on emotions, especially fear. Instead, make investments based on your financial plan. The right time to buy or invest in anything is the time when you can actually afford it. A sound financial plan and strategy will help grow your wealth and get you closer to the things you want faster.
2. Underestimating How Much To Save For Retirement
Many people make the mistake of calculating their retirement savings by only accounting for expenses for the bare essentials, when they really need to take other factors into consideration as well. For instance, if a couple travels soon after retiring, they will accumulate expenses quickly after only taking a few trips. Other people continue to spend money like they did in their pre-retirement life but quickly have to make adjustments once they realize the true implications of no longer having their income to rely on.
When planning for your retirement, think about the kind of lifestyle you want. Do you want to travel a lot? Do you want to stay home most of the time? Do you want to donate money to your favorite charity? Do you want to be able to go out to eat every night? Taking these desires into account, calculate the amount of money necessary to make it a reality. Crunching the numbers now prevents unhappy surprises down the road.
3. Not Saving For Retirement Soon Enough
Saving up for retirement is a long game. The earlier you start, the more money you will have. Think about it. The sooner you start saving, the more contributions you can make. Your contributions over time mixed with compound interest will grow your portfolio effectively and in a sustainable manner. As soon as you have the opportunity to participate in an IRA or an employer-sponsored retirement plan, sign up and start contributing right away. Do not wait. Every little bit counts.
4. Going All In With No Backup Plan
Every investment is a risk, whether it’s pertaining to stocks, bonds, venture capital ideas, or real estate. There is always the possibility of losing all of your money with any of these options, especially if you are putting all of your eggs in one basket without any kind of diversification or backup plan. Always spread out your wealth across different growth categories in order to reduce risk while also opening up the possibility for fast growth. In other words, invest some money in options that are slow and steady, and invest the rest of the money in options that are more volatile but will grow faster. This way, you can get the best of both worlds!
What To Do From Here?
If you are guilty of any of these financial mistakes, don’t waste time worrying about it.. Everything I mentioned here can be corrected with the right amount of strategy and expertise. It’s not too late to change your financial trajectory; you just need to ask for help.
Our team at Jacob William Advisory would love to help you avoid financial mistakes—or recover from them. Contact our office by calling 410-821-6724 or emailing [email protected]. Download one of the free guides on our website at https://www.jacobwilliam.com/ for additional resources to assist you.
Ryan Cooley is an associate Wealth Advisor at Jacob William Advisory, a wealth management firm whose sole mission is to serve their clients’ needs beyond their expectations. Ryan has a military background as a U.S. Army Infantryman, and he applies the values and character traits he learned through his experience to his role as a financial advisor. To this day, Ryan is passionate about veterans’ issues and holds a seat on the Advisory Board for Operation Second Chance and is a lifetime member of the Disabled American Veterans organization. Ryan obtained his bachelor’s degree in economics and his MBA from the University of Maryland. Outside of the office, Ryan enjoys spending time with his wife, Germaine, and their two wonderful children. He currently resides in Urbana, Maryland, and loves to fish, hunt, cook, watch Maryland Terrapin sports, and cheer his son and daughter on in all of their activities. To learn more about Ryan, connect with him on LinkedIn.
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful. A diversified portfolio does not assure a profit or protect against loss in a declining market.