Financial planning—what does it mean? When many hear the term, their minds immediately go to 401Ks and mutual funds. While that’s definitely part of the picture, it’s much bigger than that.
According to Investopedia.com, “a financial plan is a comprehensive statement of an individual’s long-term objectives for security and well-being and a detailed savings and investing strategy for achieving those objectives.”
In other words, it’s a plan that takes into account where you are now along with where you want to be, and it builds a bridge to get you there. And when you’re building something, it’s helpful to do an honest inventory of what is slowing down or harming the process.
What are some common mistakes when it comes to financial planning?
Spending too much
Sometimes, the most honest answers are the ones we were trying to avoid. It’s similar to when a health professional tells you to eat less and move more to lose weight. While true, it’s not fun and it’s not always easy. But if you’re serious about building the life of your dreams, it’s time to get real with your spending. Consider things like your home and your car as well as how much you’re spending at coffee shops, restaurants, and even on rarely used subscriptions.
Uneducated investment decisions
“If you don’t find a way to make money while you sleep, you will work until you die.” – Warren Buffet.
Having your money work for you is an important piece of building wealth. However, there are many ways this could go wrong. Incorrect risk assessments and lack of comprehensiveness when evaluating investments are just two of the mistakes we’ve seen that produce less-than-favorable results.
We recommend researching or meeting with a financial planner to make more informed decisions when it comes to your hard-earned money.
Incorrect use of credit cards
We’ve seen clients fly all over the world for free by being wizards at credit card rewards. And we’ve also seen clients fall into mountains of debt for misuse of them. The reality is, we never want to be in a place where we depend on credit to make ends meet. This is a vicious cycle that is both damaging and incredibly difficult to break free from.
These are just a few of the top mistakes when it comes to financial planning. If you’re just starting out on your path towards a prosperous future, check out this blog (link here once live on site) for steps you can start implementing right now to be on your way towards financial health.