The Nine Most Common Mistakes People Make in Planning Their Financial Future.
Mistake one — Failure to launch Most people spend more time planning their vacation than they do planning their financial future. To the extent most people have done any planning, it’s typically been on a piecemeal basis, and usually they receive different advice from different people at different times, with none of them referring to what the others may have done. It’s recommended one person act as coordinator and catalyst.
Mistake two — No systematic investment plan
One should try to save and invest 10 percent or more of one’s gross income monthly. The older people get, the closer they are to retirement, the greater the “more” should be. Most people are about three months away from bankruptcy. After setting aside three to six months’ income in liquid assets or cash value as a cash cushion to fall back on, a fixed amount should be invested every month to take advantage of dollar cost averaging.
Mistake three — Insufficient diversification
“You shouldn’t put all your eggs in one basket.” It’s generally considered wise to diversify investments and not to be dependent, for example, on one company’s stock, etc.
Mistake four — Inadequate disability insurance
My clients’ most valuable asset is earning power. Group disability insurance is seldom adequate, so one should acquire individual disability insurance, which is “portable,” and, if personally owned, provides income tax free benefits under current tax laws.
Mistake five — Inadequate life insurance
As a rule of thumb, for each $100,000 of income earned about $1,000,000 of income-producing capital is needed to produce $60,000 annually for a family. For most people, this means life insurance, since they don’t have other large amounts of income-producing assets. TIME (Taxes, Inflation, Mistakes, and Emergencies) makes the amount of capital needed much larger than most people would imagine. My clients are not be overly dependent on group term life insurance. It is costly, inflexible, not portable and probably won’t be available when it’s most likely to be needed — after age 65.
Mistake six — No estate plan
Most people do not have a will or trust, or what they do have is out of date. It is important to note it’s not how much is left to heirs, but how much is left for heirs. Estate taxes and related costs may ultimately take forty to fifty percent of an estate unless arrangements have been made to use life insurance proceeds to pay them.
Mistake seven — No business continuation plan
If my client owns a business, whether as a sole proprietor, a partner, or a shareholder in a closely held corporation, a business continuation plan is be in place to off-set any complications that may occur in the event you retire, die, or become disabled.
Mistake eight — Not utilizing selective compensation plans
For business owners and key executives, there are many selective compensation plans that can be tailored to provide supplemental pension and family protection benefits.
Mistake nine — Depending too much on employer sponsored plans
The only real security is that which we provide for ourselves. To count on lifetime employment with one company is foolhardy, regardless of the company’s stability.
For more information on any and all of the above call me at 610-695-8748 or send me an email at
