The first step in securing your financial future is to make a plan. But even if you have a plan, or even if you are in the process of creating a plan, there are pitfalls that you must avoid. Making critical financial planning mistakes can cost you tens of thousands of dollars in the future.
Because of this, you want to make sure you avoid these retirement planning mistakes at all costs.
Below is a list of 11 common financial planning mistakes that many people make. If you’ve made these mistakes, don’t feel bad as many others have as well.
The important thing is that you begin to work on fixing them so that you can still get ahead financially. Remember, it’s never too late to start moving in the right direction.
If you haven’t made these financial planning or retirement planning mistakes, good job! But you should still take some notes so you can avoid falling for them in the future.
11 Biggest Financial Planning Mistakes To Avoid
#1. Not Taking Action On Your Plan
Sadly this is the most common financial planning mistake. You put all your time and effort into creating your plan and get excited thinking about your financial goals and dreams becoming a reality.
Then you take a week off. That week turns into a month. Next thing you know, you have completely forgotten about your plan.
Make sure you don’t stop once your plan is made.
#2. Not Having An Adequate Emergency Fund
Many experts recommend three to six months of living expenses in an emergency fund. Given the tough economy, I think your emergency fund should be closer to nine months worth of living expenses.
Why? With such high unemployment, you never know when you may lose your job and you never know how long it may take you to find another one. It’s better to be safe than sorry.
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You make some very good points! The two that I had not thought of were your final two thoughts. I am not sure how much the savings would be from upping your deductible, but it is definitely worth a phone call. As for the “Umbrella Policy”,I think I will have to look into that. I did want to say one other thing. My father told us that we should pay extra on our mortgage if we could. I nodded and said that we would try but after discussing it with the wife, we came to the realization that if you are not going to stay in the current home you are in for the full 15 or 30 year term, what is the point. On one hand it does pay down the principal which could set you up better when you sell the house in a market that is further down than when you bought. On the other hand though, if you aren’t going to get a lower payment, then you might as well take the extra money and put it into something that is interest bearing.
A phone call to your insurance company only takes 5 minutes. And in most cases, a $1 million dollar umbrella insurance policy will run you around $200/year.
As for the mortgage pre-payment, there are a lot of factors that you can take into account when making this decision. Without creating a blog post out of this comment, I’ll just say to remember this: whatever you pay extra on your mortgage, is a guaranteed return on your money. So, if your interest rate is 8%, pre-paying is a guaranteed 8% return on your money. If your rate is low (under 5% before taking into account the tax deduction), you are better off investing your money.
Brilliant list – in fact I am going to print it off and tape it my fridge.
Sometimes we complicate these things in order to give ourselves an “out” an excuse not to just get on and take care of our business.
This clearly states what needs to be in place – and although some minor details are different if you are out of the US, the basics are sound.
Good to hear!! You’re right, when it comes to personal finance, many times we make it more complicated than it needs to be.
Great article. One thing more is that they fail to stick to the plan. If they encounter a hindrance and they were not able to overcome it, they quit. It’s never good to quit too early, better to have determination and persevere. Quitters never win.
You have touched some very valid points.Also,not planning for your retirement at an early stage is another common mistake that people tend to make.We keep on delaying things which adds to the hurdles in our financial journey.So,with the help of proper planning and budgeting,we can reach our financial goals in an easy way.The most important part being, putting our plans to action as you have rightly highlighted in one of your points.
Thanks for the nice info.