What’s the Biggest Financial Mistake You Can Make? Choosing the wrong investments? Are you waiting too long to save for retirement? Underestimating the cost of retirement? All of these are reasonable answers, but the biggest mistake you could make is not to take a holistic view of your financial picture – that is, not to bring all of the elements of yourself into the picture.
Let’s look at some of them:
- Your views on how to support your family – your decisions to support your family will clearly be an integral part of your financial strategy – and this is true at virtually all stages of your life. When your children are young, it is up to you to decide whether, and how much, and in which investment vehicles you want to invest money for their college education. When it comes to young adults, you may also need to decide how much financial support you are willing to provide, such as paying the down payment for a new home. And when making your estate plans, you need to consider how you can distribute assets to your children, grandchildren, or other family members.
- Your Personal Beliefs – As someone with civil, ethical, and moral concerns, you want to have a positive impact on the world around you. And because of this, you may feel compelled to give charitable gifts all your life and then make philanthropy a part of your heritage. To achieve these goals, incorporate gift techniques into your financial strategy today and your estate plans for tomorrow. Of course, you will need to work with your tax and legal advisors for the estate planning component.
- Your Retirement Purpose – When you retire you may enter a career path, but you also enter a world of opportunity. How will you define and act out your new meaning in this phase of your life? Do you want to broaden your horizons by traveling around the world? Would you like to give more back to the community through volunteering? Can you spend more time doing your hobbies? Each of these decisions have different financial implications for how much you need to accumulate for retirement and how much you need to withdraw from your retirement accounts like IRA and 401 (k) each year.
- Your Health – Your physical and mental health can play a huge role in your financial plans and prospects. Basically, the healthier you are and the better you take care of yourself, the lower your retirement health bills are likely to be. This affects the amount of money you have to put away for health care. You may also need to prepare for long-term care costs, which can be enormous. According to insurance company Genworth, a private room in a nursing home can easily cost $ 100,000 a year.
It can be difficult to weave all of these elements together into a single, unified vision. As a result, you may want to get help from a financial professional. But in any case, be prepared to take a holistic view of your situation – because when putting together a life’s financial strategy, every part of your life matters.
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