Avoid These 4 Common Financial Mistakes

Your financial health and trajectory are unique, and a mistake for one person could be the right decision for you.

However, there are common mistakes to avoid when building a financially healthy life. Here are four to be cautious of:  

Watching market fluctuations can be nerve-racking.  

Unfortunately, influences in your life, whether the media or family and friends, might exacerbate this fear, claiming that the market will fall apart or a geopolitical event will create chaos.  

In these moments, it’s normal to want control. You may…

• Move into an overly conservative portfolio to avoid what feels like too much risk. 
• Buy into a “guaranteed income” product because you like the sound of a guarantee. 
• Take advice from someone who doesn’t understand your lifestyle and plan. 
• Cash out of the market, moving your money back to your bank account. 

Unfortunately, “safety” can be more dangerous in the long term.  

• A portfolio that is too conservative for you could impact your financial plan, return potential, and ability to outpace inflation and maintain your current standard of living long term.  
• A guaranteed income product may be sold by another firm as the best way to stay secure, but these products can be very expensive and may not be in your best interest.  
• Insights from a financial content creator or friend could be well intentioned, but these people likely do not understand your financial position well enough to give tailored advice. 
• If you cash out of the market, you’ll likely miss out on returns. 

In our investment report on “Time in the Market,” we note how “History shows that investors who acknowledge the fact that downturns are an inevitable part of investing, look beyond short-term volatility, and remain invested have a greater chance of achieving long-term success.”  

Market volatility can be concerning, but with true experts watching your account and working for your success, it is possible to navigate it well.  

The questions and decisions surrounding life’s most important financial events are loaded:  

• When should you move?  
• How big of a trip can you afford?  
• What are the tax implications of your new business?  
• Can you support your grandchild’s education?
• Is retirement possible?  

Building an investment portfolio is only the beginning of financial management. A plan gives you direction, momentum, and peace of mind as you decide how to live, work, and give back.  

With a financial plan, you can see a timeline of your goals, understand how to achieve them, and know your likelihood of success in the long term.   

For more reasons why you need a plan, review “5 Reasons Why Financial Planning is Important.” 

Financial planning laws and regulations change, and what you thought was true before may no longer be the case.  

For example:  

• Not everyone will start taking their RMDs at age 72.  
• You can contribute more to your 401(k) and IRA in 2024. 
• Starting in 2024, you may roll over a 529 into an IRA.  

Keeping tabs on every update is tedious, but at Credent, it’s our job to know what’s changing and how it will impact you. 

The same is true when it comes to the economy and markets. For example, when geopolitical events or inflation contribute to market volatility, our dedicated Investment Management team is prepared to make intentional, slight pivots to create leverage and opportunity for clients.  

The average American, even someone financially adept, doesn’t want to constantly monitor and interpret financial, economic, or market changes. A dedicated team can relieve this pressure.  

Financial freedom changes lives, but it has the greatest impact on those who plan with a financial north star.  

When we build a client’s plan, we ask them about their Great Goals of Life, including:  

• Picture yourself XX years from now. You are X years old and comfortably retired. What are you doing? 
• Do you wish to leave a legacy to your family?  
• Is there a particular institution – a church, a school, a charity – that means a great deal to you and to which you would like to leave a meaningful legacy?  
• Are there any other financial goals you have, such as a different home, a new vacation home, weddings, cars, travel with family, etc.?  

We want to know the answers so we can build the best plan, but we also want our clients to know the answers so they can clarify what they want and why they want it.  

Our CEO, David Hefty, once noted, “The American Dream has never been about the accumulation of assets. It never has. It’s always been about how [you can] work and provide for yourself and others. That is the actual American Dream.”  

People who plan only for the accumulation of assets without a purpose will miss out on the impact and successes possible with financial freedom.  

To determine what kinds of financial mistakes you may be making, contact an advisor through the form below.