As a financial planner, licensed real estate salesperson, business/ organization analyst, event planner, and financial, organizational, and personal consultant, specializing in planning, budgetary, marketing/ sales, and financial matters/ areas, it is not surprising that many of my informal conversations, end up, being about some financial topic. Last weekend, we had a nice dinner with friends, and the woman (who is a well respected, apparently successful professional) off handedly stated, she was a terrible business person. This surprised me, because she is knowledgeable, extremely intelligent, well known, has a large practice, etc. However, in retrospect, it should not have, because most people make a variety of financial/ money mistakes/ errors, and while, for some, it only slightly harms them, for others, might be somewhat devastating. Every generation seems to make its own set of financial mistakes.
1. 20’s – Playing it too safe
This is the decade when most people should be taking their biggest risks, because they generally have fewer responsibilities, have more time to reap the rewards/ benefits, and should be seeking growth in terms of their portfolio. However, the vast majority of these individuals, either don’t consider investments, at all, or behave fearfully, by remaining in the very limited comfort zone, of merely putting their money in the bank. Especially in these times, when interest rates are so low, this type of behavior does not even keep up with behavior, and they lose valuable years, when they could be creating the foundation for a solid financial portfolio.
2. 30’s – Comparing themselves to their parents, etc
Times have changed, and it is far more challenging today, to reach a comfortable standard of living, than it might have been, for some, in the past. It is a far more complicated economic world, with many more options, as well as far more challenges/ obstacles. This group will not reach their desired goals by trying to mirror the past, but rather by disciplining themselves, to create, develop, and implement a formal investment plan.
3. 40’s – Unprepared
We’ve all heard the expression, Not ready for prime time, yet that is exactly what many in this group are! They are simply not prepared for the decade when many witness their largest expenses, such as housing and children related costs. The past decades should have been used to create educational accounts, so the whopping costs associated with education, were less overwhelming! Many purchase their first home, or upgrade (move up) during this time of their lives. However, while one might qualify for the mortgage, that is only part of the expense of home ownership, including maintenance, taxes, repairs, renovations, etc. At the same time, one must continue planning for his retirement years, because it takes a sizeable nest egg, to retire comfortably.
4. 50’s – Panic and catching up
Magically, most people begin to realize during this period, they had not done as good a job, as they might have hoped to do, when they were younger. Many begin to panic, wondering how they will ever have enough to retire on. Others begin to address the accumulation of debt they may have acquired, because it may have been easy and convenient, in the past. Rather than panic, the best approach is to develop the discipline, and make it a priority, to use a systematic savings/ investment plan, of some sort. This means taking advantage of dollar cost averaging, where one invests the same amount on the same date, every month, regardless of market conditions. For most people, selecting 3 or 4 quality mutual funds, with different objectives (growth, balanced fund/ asset management, blue chip, etc), is the best course of action.
5. 60’s and above – Refusal to evolve
While many believe 60 is today’s 50, most people still aim to retire somewhere between 65 and 70. Some have great pensions from work, but many do not! Some have disciplined themselves to consistently contribute to IRA’s, 401 (K)’s, and other retirement savings vehicles, and are in better shape. Some have used a trusted adviser or advisers, for years, but have not planned for that individual’s changing life plans. Parents must begin the conversation, at least when they are in their fifties, if possible, so a responsible child, is knowledgeable, trustworthy, and ready to help them, if they cannot do so themselves. Formalize this process, by discussing with an Estate Attorney, etc, how best to both protect assets, while still maintaining a comfortable retirement lifestyle.
This article only touches the surface, in terms of helping yourself financially, by planning better, and doing what’s necessary, when it will do the most good. Don’t get worried or depressed if you haven’t done some of these things so far, but, rather, get started today!