How To Spot Hidden Financial Mistakes


Do you ever wonder about what hidden financial mistakes you are missing?

Sometimes our financial mistakes aren’t obvious, so in this episode we are discussing 3 hidden financial mistakes that you may be making and how you can spot them.

Uncertain outcomes cannot be predicted

Are you guilty of believing an uncertain outcome is certain? This is a common feeling when markets are doing well.  We tend to convince ourselves that stocks are due for a pullback. Example A, last February when news of the Coronavirus first broke. Even if you predicted the severity of the COVID decline, was it easy to become bullish on double digit decline days and doom and gloom headlines?

People are naturally overconfident, but too often markets move faster than you can react at extremes. Peter Lynch reminded us all that “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”

One strategy for limiting overconfidence is by talking through potential outcomes with a financial advisor or a financial accountability partner. This can help you balance the potential for unexpected outcomes with your retirement savings.

Don’t underestimate the market’s ability for positive surprises

Many people have a negative money script or way that we view finances. This scarcity mindset could penalize their financial potential. There will always be reasons to wait it out or not invest, but instead you can focus on not missing out on opportunities. You don’t want to take a pay cut in retirement because of missed opportunities.

We often delay financial decisions to give ourselves time to think about it more or evaluate the alternatives and to consider all outcomes. But often the best investments are the most difficult ones that you have to make. This is why having an investment plan makes sense.

“Investing is a lifelong journey. Making money slowly is much better than making then losing money quickly.” — David Booth.

Are you missing hidden tax opportunities?

There are different tax opportunities that can be taken depending on your phase of life and how the laws change. One opportunity that many retirees were able to take advantage of this year was the lack of required minimum distributions (RMDs). This allowed people to do Roth conversions. Retirement brings on a wealth of tax planning opportunities since you have more control over your income in retirement. Advanced tax planning early in retirement can help you save on your lifetime tax bill. Listen in to hear how long-term tax planning can save you money over your lifetime.

Estate planning pitfalls

Estate planning is often the last part of a financial plan that people want to address since it is the least enjoyable part of financial planning. But if you want a say in what happens to your money after you are gone then you’ll need to create an estate plan and review it periodically. Check out episodes 102 and 122 to learn more about reviewing your estate planning.

Avoid the Big Mistake

  • Do you have enough?
  • Are you saving enough?
  • When is the best time to invest?
  • Are you missing out?

These are all questions that can be answered with the right financial plan. Think about what a financial plan can do for you. If you are looking for a financial advisor to help you create a financial plan learn more here.

Related: Three Questions To Ask During Stock Market Manias