We’re all humans and as such, we all make mistakes from time to time. The good news is that if you put some work into it, you can learn from your mistakes and then do better in the future.
However, when it comes to your finances the important thing is to recognize when you might be making a financial mistake. Here are the financial failures that people most commonly make and what you need to do to overcome them.
#1. Failing to act
When it comes to thinking about your finances in trying to make a plan is easy to end up feeling overwhelmed and then failed to do anything. One area where there is often a financial failure is failing in planning for retirement. The reason for this is that people have a difficult time choosing what to invest in, which can lead to becoming mentally paralyzed and not doing anything.
In some cases failing to act can be caused because of a lack of urgency. It’s just tough to sit down and work on your personal finances because there’s almost always something better and more fun to do.
#2. Failing to plan
A survey done and published on GoBankingRates.com revealed that a lot of Americans worry about money – and one of the things they worry about is retirement. However, people don’t just struggle with this they also struggle with financial planning in general. Financial planner Shelley-Ann Eweka recently said, “A lot of people fail to plan or don’t understand the importance of why they need to plan.”
Northwestern Mutual did a survey that found two thirds of all Americans are headed for a financial failure because they don’t have a long-term financial plan.
The first step in making a plan is to create your goals. What this requires is that you take time out, sit down and determine what it is you want to achieve financially. For example, you will need to decide when you would like to retire. If your goal is to retire early but you also want to say for your children’s’ college education you need need help in determining what you will need to achieve these goals. This is where a financial planner could create a blueprint for you.
#3.Failing to prepare for emergencies
In the same survey done by Go Banking Rates, it is also discovered that Americans have a hard time saving for an emergency. What this translates into is that they won’t have the cash available to cover an emergency and will then have to rely on credit, which means building up debt.
You’ve probably heard of emergency planning but have you put into place? What financial experts typically say is that you should have enough in an emergency fund to cover six months’ worth of living expenses in the event that you lose your job, have a serious illness, are required to take a huge cut in pay, need to fund a maternity leave or have some other emergency. In addition, you need to have enough insurance to cover any catastrophic event. This means in addition to having auto, health and homeowners insurance you should have life insurance and disability insurance to provide for your family in the event of injury makes you unable to work or if you were to die. You might also want to consider long-term care insurance should the day ever come when you need to move into an assisted living facility or nursing home. This is due to the fact that health insurance typically does not cover these expenses.
#4. Failing to make an estate plan
It’s never easy to think about your own death but it’s important to have your legal documents ready to go in the event something happens. If you don’t, you’ll leave your loved ones to sort of stranded in the knowing what to do.
As a beginning you need to make sure you have your beneficiaries listed on all of your financial accounts and that he get married, divorced, have children or have some other life to alter event that you update them.
In addition, you need to have a financial and medical power of attorney naming a person who will make your healthcare and financial decisions for you if you can’t do it yourself. And, of course, you should have a will specify who gets which of your assets with guy and how your children will be cared for. If you don’t do this, the court will make these decisions for you.
In most marriages one of the two partners handles all of the family finances. If that person suddenly dies then the surviving spouse has to suddenly handle financial matters that he or she may never have dealt with before. That’s just not a good situation.
According to a Fidelity survey published on CNBC.com, 43% of their respondents admitted that they do not know how much their partner earned.
You can avoid this by making sure that the both of you are aware of each other’s assets and accounts – even if only one of you handles the financial daily tasks. You could consider having a joint bank account as this would make it easier for the surviving partner to easily access money without having to go through the probate process.
Finally, if you have adult children make sure to share information about your financial situation with them. You need to let them know what insurance policies, banking accounts and sources of income you have so if you can no longer handle your own finances they can help you. If you don’t provide them with this information will have to spend hours and hours trying to put the pieces of your financial puzzle back together on their own.
#6. Failing to get financial help
If you’re lucky you work for a company that offers its employees some financial planning resources. If you’re really fortunate this can include access to financial advisors for one-on-one counseling. If so, you need to take advantage of this benefit.
A survey done by TIAA-CREF learned that people who did get professional advice were able to save more – specifically when it comes to their retirement. If you’re not so fortunate and your employer doesn’t offer financial planning services, you need to find a financial planner on your own. There are two sites, NAPFA and Right Financial Advisor where you can get matched with a financial planner.
None are insurmountable
The good news is that while any one of these failures could sever ties your finances there are none that are insurmountable. You need to take the right steps to make sure you overcome them and the real key is not to wait to get some financial help.