9 Haunting Financial Mistakes You Need to Stop Making
Don’t let these common financial errors haunt your future! Just like planning the perfect Halloween costume or route, a little foresight with your money makes all the difference.
👻 Mistake #1: You Don’t Have an Emergency Fund.
Your emergency fund is like the grown-up who keeps you safe on Halloween—it safeguards you! If you don’t have enough savings (3 to 6 months of essential expenses), you’ll be forced to dip into your long-term investments or borrow at high interest rates when life throws a curveball. Safety first!
👻 Mistake #2: You Wait Too Long to Start Saving and Investing.
This is the most crucial step after setting up your safety net. If you wait until the end of the night to start trick-or-treating, all the good candy could be gone! The same is true for your money. Time in the market is potentially your greatest ally. Start small, but start now. You may be disappointed in your money stash later in life if you put this off. Pay yourself first!
👻 Mistake #3: You Don’t Have a Financial Plan Based on Your Goals.
A financial plan is your roadmap to financial freedom. Without one, you’re just wandering around the neighborhood hoping for candy! Define your goals (retirement, house down payment, etc.), create a plan, and review it yearly. This helps prevent future disappointment.
👻 Mistake #4: You Don’t Have a Spending Plan (A Budget).
Eat all your Halloween candy at once, and you’ll get a financial stomachache later! A monthly spending plan helps you be intentional with your hard-earned cash so you have money for both today and the future (like college or retirement).
👻 Mistake #5: You Fail to Diversify Your Portfolio1.
Don’t collect only one type of candy bar! If you don’t diversify your investments across different asset classes (stocks, bonds, etc.), you set yourself up for a big hit if that one investment falters. Diversification helps spread your risk!
👻 Mistake #6: You Don’t Pay Attention to Investing Costs and Taxes.
Homemade costumes save money, and watching your investing costs does too! Small differences in a fund’s expense ratio (the percentage taken out annually to cover fund expenses) can add up to a huge chunk of money over decades. Minimizing taxes (like through IRAs) also helps you strive to maximize your returns.
👻 Mistake #7: You Try to Time the Market.
Zig-zagging around the neighborhood for the “best” houses is inefficient, and trying to predict the markets is nearly impossible. Stop trying to time it! Time in the market is key. Stick to your plan and invest as soon as you can.
👻 Mistake #8: You React Emotionally to News and Sell Investments.
Ignore the spooky myths and rumors about tainted candy! Markets fluctuate, and that’s normal. Don’t let fear or sensational news stories cause you to make an emotional decision and sell your investments. Stay focused on your plan.
👻 Mistake #9: You Forget to Rebalance Your Portfolio2.
Do a candy-stash trade to balance out your treats! Similarly, rebalancing helps bring your portfolio back to your intended allocation3. Do this at least once a year. It aims to ensure your portfolio isn’t secretly less (or more!) aggressive than you want it to be.
Disclosures:
- There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
- Rebalancing a portfolio may cause investors to incur tax liabilities and/or transaction costs and does not assure a profit or protect against a loss.
- Asset allocation does not ensure a profit or protect against a loss.
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual.
Which of these mistakes do you think is the hardest to avoid? Let us know in the comments! 👇
