Long Term Financial Planning Mistakes to Avoid
Long Term Financial Planning
It’s never too early or too late to start planning for the long-term future. Whether you’re nearing retirement or nearing high school graduation, your long-term financial stability is something that should be thought about more often than not. That’s the first mistake people make. Some of us pretend like there’s no such thing as a retirement plan or 401K. There’s no shame in living in the present, but the future still needs to be acknowledged. A study shows that only about 33% of U.S. households have an IRA designed to help save for post-retirement life and less than half of those people have a 401k set up.
Create a Retirement Plan
Another statistic shows that 39% of people are giving little or no thought about retirement planning, again hitting home the fact that not enough of us are thinking about the future. With an ever-changing economic landscape, it’s important to have a stable financial plan in place. Others will choose to give up, saying things like “what’s the use?” or “I’m already in debt.” This is the easy way out. It’s easy enough NOT to try, but putting some effort into a retirement plan will go a long way. Saving even the smallest amount of money will help benefit you and your family in the future. Worried it's too late to start saving for retirement? It's not! Many have started a retirement fund in their 40’s and 50’s and have gone on to create a substantial retirement fund.
Do Your Research
Another big mistake that many people encounter is not doing enough research. Many prospective retirees will choose a dollar amount or retirement age out of thin air without doing research. How will you know when you can retire if you don’t have an idea of how much money you’ll have saved and how long that money will last? This is where a retirement plan comes into play. Essentially a budget for your post-work phase of living, a retirement plan will give you an idea of how much you’ll be able to spend, how long it will last, and even an estimated age of when you would be able to retire. It’s important to have facts and statistics to backup your financial plan. Retirement is all about stability, and creating a solid retirement plan will give you some future stability. Your local bank or financial firms will be able to help you create one that will keep your future on the right track. Some factors to consider when planning your retirement plan include:
- Understanding your investments and market risk
- Planning for inflation
- Considering long-term care expenses
Doing research goes hand in hand with being realistic. Unfortunately, many savers will choose an unattainable goal, so be reasonable when setting one. Crawl before you walk, set smaller goals, not necessarily short term goals, but goals that will be easy to monitor and attain. Oftentimes those who save will get discouraged because they’re not rolling in the money. It’s okay to be optimistic, but backup your goals with research, don’t bank on investing in “the next big thing” that will earn you millions – instead focus on the little things you can control by making smart, well-informed decisions. Write things down on paper. This may seem obvious but many will choose to keep mental notes of their investments. Having everything written down will give a clearer understanding of where you stand financially.
Work With Financial Advisors
Finally, the biggest mistake people make is trying to tackle the burden of long-term financial stability alone. Many feel embarrassed or ashamed when talking about their future or finances, but this is something that takes cooperation from a variety of people. Hire a financial planning professional to help with saving or investments. Oftentimes a third party will be able to view your situation with not only more knowledge in the field but more clarity as well. This overwhelming problem of financial stability can often make us miss some obvious solutions. Family should also help in your future. Oftentimes, old parents are afraid to reach out for financial help, but now is the time to ask for help. Just talking about the future will lighten the load.
It’s time to change the stigma that long-term finance carries. It shouldn’t be a looming thundercloud in the distance. It should be something that’s easily tackled with good planning and a solid plan of attack. These tips will help you plan for future of more sunny skies instead of dreary days.