A failure to plan is a big reason why many people’s financial goals are missed, year after year, until it’s too late to fix things.
You wouldn’t fly a plane without a flight plan. The same is true for a financial plan. You need to know where you want to go, and how you are going to get there.
A failure to plan is a big reason why many people’s financial goals are missed, year after year, until it’s too late to fix things. Those who succeed in investing, are more likely to be people who create and follow a long-term, well-thought out financial plan.
Arecent article in Forbes, “3 Common Mistakes to Avoid When Making A Financial Plan,”describes these miscues:
- Not Creating a Comprehensive Plan. A major error most people make when creating a financial plan, is that their plan is too narrow. A sound financial plan is comprehensive in nature and covers all areas of your life, rather than only a single area like an investment portfolio. It should address tax issues, risk management, estate planning, and long-term care needs. These are all vital when creating a solid long-term financial plan.
- Creating a Balanced Portfolio but Never Re-Balancing. Another frequent mistake people make is creating a balanced portfolio—and then not re-balancing it on a regular basis. You should maintain the portfolio balance, as the market ebbs and flows. The original portfolio can and will change over time, as events like market rallies naturally increase overall equity exposure, or retirees take required minimum IRA distributions that may cause an over- or underweight to equities.
- No Follow-Through. The third mistake commonly committed by investors when creating a financial plan, is that they spend time creating their plan, but they don’t follow-through and act. You must implement your plan.
These are far from the only classic investment mistakes that people commonly make. Others are selling into a down market, failing to follow through their financial plans, trying to time market swings and reacting to short term trends. Create a financial plan with the long-term in mind, execute the plan and remember that a portfolio needs tending like a garden, as you proceed through the seasons of life.
Reference: Forbes(April 6, 2018) “3 Common Mistakes To Avoid When Making A Financial Plan”