The Biggest Money Omissions I See

April 14, 2022

By Kimberly Quinn, CFP®

As a financial advisor, I know how many concerns and considerations you have on your plate. There’s a lot to think about—from investment management to insurance needs to estate planning and beyond!

Over the years I’ve seen many of my clients make the same omissions again and again. To help educate other investors, I thought it’d be helpful to share these oversights. After reading about these common money issues I hope you’ll be less likely to make them yourself.

Let’s look at some of the biggest money pitfalls I see and how you can avoid them.

Not Understanding the Factors That Can Affect Your Outcome

Financial planning isn’t as simple as investing in the market and letting your portfolio grow. There are many factors to consider, some of which are in your control and some of which aren’t. Some common factors I see many investors overlook include:

Inflation

As an investor, you’re always fighting against inflation. While we can’t control inflation rates, we can control the choices you make with your investments to help beat inflation. According to the U.S. Department of Labor, the current annual rate of inflation is 8.5% for the previous 12 months, ending in March 2022.(1) This means that to beat inflation, your investments need to be earning more than 8.5%. Many investors forget to consider inflation, a critical oversight.

Sitting Out the Market

Many investors are nervous about entering the market, and I understand that hesitation. But I often see investors make the strategic mistake of waiting too long to invest or sitting out the market. I encourage my clients to start investing early and take the steps they can now to prepare themselves for the future. We don’t have a crystal ball and will never know where life will take us, so it’s better to be prepared for whatever the market might bring.

Investor Psychology

I urge my clients to consider their own psychology as an investor, one of the most consequential factors. We’re all different with different goals, risk tolerances, and financial needs; that being said, often my clients are their own worst enemies. For example, it might be tempting to sell some of your investments and bail when we see the market dip. But data shows that when you ride out the dip, you often come out ahead. According to the Securities and Exchange Commission (SEC), “over the long term the stock market has historically provided around 10% annual returns (closer to 6% or 7% ‘real’ returns when you subtract for the effects of inflation).” (2)

Emotional, rash decisions are often one of the biggest detriments to an investor’s performance.

Not Updating Your Financial Plan As Life Changes

Your financial plan shouldn’t just sit on a shelf and collect dust. It should be as dynamic as you are, changing with you as life changes. Whether you get married, go through a divorce, or welcome children or grandchildren into your life, these important life milestones impact your plan, from investment management to insurance planning to estate planning. Talk to your financial advisor, CPA, and attorneys if something in your life changes and you need to review and potentially update your plan.

Not Selecting the Right Insurance

You likely need different types of insurance (and different amounts of coverage) for each stage of life. I encourage my clients to think outside of just health insurance and consider comprehensive coverage. Your insurance needs might include:

  • Disability insurance
  • Life insurance
  • Umbrella coverage
  • Long-term care insurance
  • Medicare insurance

Proper risk management is key to staying afloat during uncertain times. This can be accomplished by considering unexpected risks like divorce, disability, accidents, and illness, and ensuring you’re properly covered. Is your life insurance through your employer? It’s important to know if your coverage is portable. If not you may no longer have coverage when you leave the employer.

Are You Making Some of These Financial Mistakes?

Don’t let these common financial mistakes derail your wealth management plan. If you’d like to discuss how to navigate your financial questions, call us at (617) 610-0587 or email us at info@cim.financial.

(1) https://www.bls.gov/news.release/pdf/cpi.pdf
(2) https://www.sec.gov/investor/pubs/sec-guide-to-savings-and-investing.pdf

About Kim

Kimberly Quinn is co-owner and CERTIFIED FINANCIAL PLANNER™ professional at Catalyst Investment Management, an independent firm dedicated to providing personalized financial advice and planning. With over 30 years of experience, Kim is passionate about developing long-term relationships with her clients so she can provide them with customized solutions that make the most impact on their lives. Kim specializes in serving business owners and pre-retirees and post-retirees who desire a road map to their ideal retirement and women who are recently divorced or in the process of getting a divorce. Every client of Kim’s receives her utmost dedication and attention as they work toward their goals. She graduated from Boston University with a bachelor’s degree in business administration and spent much of her career prior to CIM at Charles Schwab, where she held various roles, including financial planner, vice president, and financial consultant. Outside of work, Kim loves spending time with her two teenage children, cooking, and staying active by running and skiing. Learn more about Kim by connecting with her on LinkedIn, and be sure to register for her free divorce workshop that takes place on the second Saturday of every month.

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