Updated: Nov 15, 2021
By Yusuf Osman, MBA
As nice as it would be, it’s impossible to live a life without mistakes. Thankfully, most mistakes are minor, don’t cause much regret, and give us an opportunity to learn. But financial mistakes? They’re in another category altogether and are often a lot harder to swallow or difficult to recover from.
That’s why knowledge is power when it comes to avoiding financial mistakes. The more you know, the better prepared you are to make the right decisions and be proactive about your financial future. Here are 5 common financial mistakes I’ve seen over the years and how you can prevent them from wreaking havoc on your finances.
1. Failing to Develop a Comprehensive Estate Plan
When was the last time you updated or reviewed your estate plan? Perhaps more importantly—do you have an estate plan that includes all the necessary documents and covers all your bases? If you have money or other assets to leave behind, you need an estate plan. A solid estate plan protects you, your assets, and your family. It ensures your wealth is distributed to the people or charities you want to receive it, and it makes it much easier for your executor to manage the affairs of your estate.
Your estate plan will be as unique as your life, but it should include a will to provide for guardianship and asset distribution, medical directions and healthcare proxies, powers of attorney, and possibly trusts.
2. Not Sticking to Your Goals
We all have financial goals that are important to us. But somehow we aren’t great at playing the long game of saving and investing to achieve them. Sometimes we need money now, and that’s what distracts us from the goals we need to accomplish down the road. If you’re not disciplined about your financial situation, it’s quite easy to get distracted and lose focus.
To help you stay focused, set small financial goals that gradually add up to larger milestones. Also, make sure to always set aside your emotions when dealing with money. Address your feelings of insecurity, anxiety, and fear by speaking with someone you trust, so you can stay focused on what’s really important to you.
3. Neglecting Your Retirement Income Plan
A well-developed retirement plan should include the following types of income: guaranteed income, such as an employer pension plan, Canada Pension Plan (CPP) or Old Age Security (OAS), and investment income, such as real estate or funds from your retirement account.
But it takes more than just saving a specific amount of money to prepare your finances for retirement. Aside from the types of income, you also need to think about the timing of your retirement withdrawals. You likely know that you can start withdrawing CPP or OAS at an earlier age; however, if you delay taking benefits until you are 70, your benefit amount will increase.
There are also tax implications of withdrawing certain investments at different times that could affect your investment and retirement strategy. It is a good idea to outline an income plan with your financial professional that takes these considerations into account.
4. Not Planning for Unexpected Risks
Very few people, if any, predicted COVID-19 or the Great Recession. But these two events have made it abundantly clear that we need to consider unexpected economic downturns as part of our retirement planning and wealth management strategy. We also need to consider unexpected risks that are more personal in nature, such as divorce, illness, or even higher healthcare costs, and how these possibilities could affect your strategy in retirement.
5. Believing That You Have to Stay Fully Invested All the Time
Many people blindly follow a buy-and-hold investment strategy, standing still when the markets change. And while you don’t want to make emotional decisions or panic-sell, there’s no reason to rack up unnecessary losses along the way. We believe it’s better to be safe than sorry, using techniques to try to determine when to buy, when to sell, and when not to buy. That’s why I implement my Flex Investment Strategy to adjust your income and equity components of our portfolio based on market conditions.
Are You Making Some of These Financial Mistakes?
That’s what I’m here for. I can help you avoid these common mistakes and plan your financial future with intentionality. Contact me at (613) 230-5895 or firstname.lastname@example.org to get started.
Yusuf Osman is a Senior Investment Advisor at Argosy Securities Inc., an independent full-service financial advisory firm dedicated to helping clients create financial freedom, security, and peace of mind. With over 30 years of experience in the finance industry, Yusuf is committed to educating, engaging, and inspiring as many people as possible to take control of their finances. He spends his days developing a thorough understanding of his clients’ lives, concerns, and dreams to help them build a program that keeps pace with changes in both the markets and their lives. Yusuf graduated from the University of Ottawa with a bachelor’s degree in Science and earned an MBA in Finance from Queen’s University. To learn more about Yusuf and his Dynamic Wealth Program for Women, go to https://www.argosy-osman.com/women or connect with him on LinkedIn.