20 Most Common Financial Mistakes
For over 20 years we have helped clients navigate major financial decisions. As they say in Japan “one should squeeze water from stones”. It is our role to examine all of the potential opportunities and risks to our clients’ net worth. Canadian Investors are faced with many tough decisions that may have long term implications. This article will share with you the 20 most common financial mistakes.
1. Not having a Financial Plan
A financial plan is a road map that will help you find your way to your goals. Having a plan in place and a relationship with a good financial advisor will help you avoid many of the pitfalls we have laid out in this article. Plan often and plan early. Planning early provides you with a great deal of advantages. Re-evaluate your plan annually with your financial advisor to ensure that your plan still fits your needs as your life changes. Discuss money with your spouse, partner and children with budgets and common financial goals.
2. Spending more than you earn
No matter what you make, spending more than you earn is a sure way to end up in financial trouble. Wasting money frivolously on things that you don’t really need could keep you in a cycle of debt. Before every major purchase ask yourself if you really need the item. Helpful Strategy - Nice to have vs. Need to have.
For big ticket items a gut check may be required if it is not a necessity. Would it be nice to have a pool or new car or do you need it? By pausing for a moment to reflect this way will help you avoid big ticket shopping mistakes.
“But interest rates are so low! I will put it on my credit card or line of credit and pay it back later”
Be careful… one day you have to pay back debt. Also consider the difference between good debt and bad debt. Good debt used for investment allows interest expenses to be deductible; while bad debt incurred to buy a new car or pool is not.
3. Not thinking in after-tax dollars
That daily coffee or lottery ticket may seem like pocket change. If you think about the money you spend in pre-income tax dollars then that pocket change begins to add up. To put it another way, you have to make $100 in order to spend $50… Continue Reading
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