With Halloween in a couple of days it only makes sense for us to discuss the 5 scariest financial decisions you can make.
- INVEST MONEY WITHOUT A PLAN:
A properly designed financial plan can provide many benefits. From hedging against inflation to providing you with confidence in retirement, a plan tailored to your situation will give you substantial peace of mind in an ever changing world. Investing without a plan is like building a house without a blueprint, driving across the country without a map, or trying to program your remote control without the instructions. Simply put: Get A Plan.
2. BELIEVING NOTHING CAN EVER GO WRONG:
More often than not I find myself trying to convince people that it will not always be blue skies and sunshine. Life is unpredictable. Protect your plan, your future, and your loved ones with the appropriate types of insurance. Life, health, disability, & LTC should always be a part of the conversation.
3. GETTING YOUR ADVICE AROUND A WATER COOLER:
It never fails. There is always someone in your life that is quick to give you financial recommendations without even understanding your personal situation. Find a financial professional that will take the time to understand your goals, dreams, likes & dislikes, appetite for risk instead of listening to your cousin Vinny.
4. TAKING A LOAN AGAINST YOUR 401(K)
This will definitely stir conversation. While you may be able to illustrate certain scenarios where taking a loan makes sense, as a general rule the odds are stacked against you. Here are few potential issues that may give you some heartburn:
- You may forfeit some of your company's matching contributions
- Job change or layoff could cause a loan default. The most recent Covid crisis has caused many people I know have been laid off suddenly. This can create a significant setback to your retirement planning
- Opportunity cost could be significant if the market is up over the payback period
- Risk of treating your 401(k) like a savings account could lead to a deficiency in the amount needed for retirement
5. NOT FULLY UNDERSTANDING THE VARIOUS TYPES OF RISKS ASSOCIATED WITH FINANCIAL PLANNING:
Most people understand market risk as the fact that investing involves volatility. However, there are quite a few other risks that should be taken into consideration.
- Credit Risk
- Interest rate risk
- Taxes & Inflation (always underestimated)
- Healthcare costs
- Sequence of return risk
If you'd like some help with your financial plan, we'd love to chat! Click here to schedule an appointment with one of our advisors today!