Financial Planning Mistakes to Avoid

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broken-potUnfortunately, most people don't visit a financial planner until they've already made hefty mistakes regarding their financial lives. Self-correction is very rare, and usually only occurs after someone has experienced bankruptcy, getting turned down for a loan because of bad credit, or other similar problems. However, if you feel that you are on the wrong path and want to correct your behavior, there is no better time to start than now. Take a look at what financial planners say are the 7 biggest mistakes seen in their line of work and see if you are falling prey to the same problems.

1. Not having a budget.

The best way to go over your budget is by not having one. You may think you aren't spending that much money or that you have plenty in the bank, but flying by the seat of your pants just won't work when it comes to your money. Taking time to create a plan for your money is critical to avoid any financial mishaps.

2. Spending more than you make.

The fastest way to get in debt is by spending money that you don't have. You can tell yourself that you will pay it off with the next paycheck, but that will lead to being behind on payments and falling farther and farther in the hole. Sticking to a budget and/or a plan is the best way to keep your spending under control.

3. Not setting goals.

The only way to ensure that you follow a budget is by setting financial goals for yourself. Set dates that you want to have a certain amount of money by, and stick to a plan that will allow you to fulfill those goals you set. Create short and long term goals with the short term goals guiding you toward fulfilling your long term ones.

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4. Trying to time the market by jumping in and out.

Taking your money in and out of the market will ensure loss in the over time. Most financial planners advise you to either keep your money in or out, but not going back and forth. Studies have shown that if you keep your money in, it will result in at least a little financial gain in the long run.

5. Not having a plan.

It is great to set financial goals, but not having a plan to reach those goals often results in people falling short. Set a plan in place to keep you on your budget and on track to reach those goals you set.

6. Not earning more on your investments than the rate of inflation.

It's always great to earn more for your money, but unfortunately money is almost always worth less over time. Make sure you are making smart investments that are earning more than what the rate of inflation will be. If you aren't sure about that number, a financial professional would be more than happy to point you in the right direction.

7. Telling yourself that you will start tomorrow.

Much like diet and exercise, the more you put financial planning off, the less likely you are to do it. Every time you tell yourself that you will start tomorrow, more of your money is being spent and less of it is contributing to the financially stable future you should be working toward.

If one or more of these mistakes applies to you and your financial life, you may want to sit down and take a look at how you are handling your money. Start creating a budget and goals to get you moving toward a more stable future. If you need help getting started, financial planners and advisers are always a great place to begin.

Gregory M. Reed is a Certified Financial Planner (CFP®) and a member of FINRA and SIPC, who works with Raymond James Financial Services, Inc. You can find him at 3201 S. Providence Road, Ste. 102 in Columbia, Mo 65203 or contact him at 573-777-1934.

A post by Gregory Reed (2 Posts)

Gregory Reed is author at LeraBlog. The author's views are entirely his/her own and may not reflect the views and opinions of LeraBlog staff.
The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Any opinions are those of Gregory M. Reed, CFP® and not necessarily those of RJFS or Raymond James.

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