10 Financial Blunders to Avoid for Long-Term Security

When it comes to life's biggest moments, there's usually a plan of action. College, weddings, and becoming a homeowner all require a budget, a timeline and attention to detail. So does retirement, but many don't take the time to properly ensure their golden years won't be burdened by lack of financial planning. Saving for retirement is essential and finance experts we spoke with share tips on mistakes to avoid when devising a plan for long-term security, 

Making a big decision based on emotions usually leads to poor choices and regret. The same goes for financial planning. "One of the bigger mistakes I see is when people's emotions take over and that's what drives their financial decisions," Eric Mangold, Wealth Manager and Founder of Argosy Wealth Management tells us. "Very often, the emotional decision is not the most prudent financial decision. If you feel concerned or overwhelmed by a financial situation, you should consult with a financial professional who can take an unemotional look at what you are trying to accomplish, and then help you move forward." Michael Ryan, a Financial Coach and Planner agrees and says, "Emotions like fear and greed can cloud judgment and lead to poor decisions. Stick to a well-defined investment plan, keep emotions in check, and focus on your long-term goals."

Inflation can be problematic for retirees and make it more challenging to maintain that same standard of living. Ryan says there is a way to plan for it, but many don't. "Inflation erodes the value of money over time," he states. "Consider investments that outpace inflation to ensure your savings maintain their real value and preserve your purchasing power. The past year or two has taught people the inflation lesson unfortunately. But revisit your financial plan and make sure it includes a realistic inflation number."

Many people in their 20s and 30s don't think about saving for retirement because they're living in the moment or it's just a priority, but that's a big mistake, Mangold says. "The earlier one starts to save, the better it will be for the long-term growth of the portfolio. If someone has a good savings plan in their 20's or 30's, they will be on their way to growing a larger portfolio than someone who starts to save in their 40's or 50's." You can start saving when you're older, but it's more challenging to catch up, so most experts encourage you to start when you're young. Ryan adds, "Starting early is the key to retirement savings success. By beginning your savings journey as soon as possible, you give yourself the advantage of time and the power of compounding interest. When working with young couples, I would always introduce them to a retired client – and that was always the number one advice they would give to someone starting out: 'I wish I started earlier.'

"High fees can eat away at your returns over time," Ryan warns. "Look for low-cost investment options to ensure more of your money stays in your pocket and works for you. But I do want to warn – the opposite is true. Don't ONLY look at fee's when choosing investments. Cheapest is not always best."

Mangold advises to "stay invested." He explains, "Most folks have heard about the miracle of compounding. What they don't know is that it takes many years for the miracle to actually happen. If you take out funds you are limiting the impact the miracle of compounding can have."

High interest credit cards and loans that you're unable to pay back is considered "bad debt," and that gets you into trouble. Mangold warns that "Having bad debt erodes your ability to grow wealth. High interest credit card debt is a headwind pushing your ability to grow wealth down. Pay it off as quickly as you are able."

When investing Ryan recommends putting money in different areas and not to "

put all your eggs in one basket." He explains, " Spreading your investments across different asset classes helps reduce risk and increases the potential for consistent returns. It is easier said than done, but nobel prize winning studies prove it."

Unexpected things happen in life all the time. You can lose your job. You fall ill or a countless other things can go wrong. Not having anything put aside for rainy days isn't advised. "Building an emergency fund is crucial," Ryan emphasizes. "Life has a way of throwing curveballs, and having readily accessible cash can prevent you from tapping into your retirement savings prematurely. I also call it an opportunity fund, it doesn't only have to be for bad things." Mangold adds, "General financial principles suggest you should have at least 3-6 months' worth of expenses saved in something safe and liquid. That way, if an unforeseen expense, medical bill, a job layoff, etc, comes, you are prepared and you don't need to go into debt to finance that need."

When the market takes a downward turn, people tend to make abrupt decisions and Ryan warns against doing so. "Instead of trying to predict short-term fluctuations, focus on a long-term investment strategy," he says. "Stay invested and avoid the temptation to make hasty decisions based on market timing."

You can make plans in life, but they can be shattered by tragedies you didn't see coming. "Most of us have seen them- the posts for crowdfunding for the husband or wife who lost their spouse without enough or worse, any life insurance," Mangold says. "Crowdfunding isn't life insurance. Most people are so focused on rates of return in their overall portfolio they overlook the glaring need to protect their house first. Because if you don't protect first, and loss can invade your castle, it doesn't matter what rate of return you get if loss can take away what you've built. Make sure you have the right amount of life insurance, disability insurance, long term care insurance, and your wills and other estate documents have been prepared."

The information provided on this website is intended for general informational purposes only and should not be considered as professional financial advice.