Making one bad financial decision can set you back further than making many right decisions can set you forward.

How do we mess up our financial lives?

 

  • We save too little.
  • We spend too much.
  • We change careers and threaten the income stream.
  • We don’t plan effectively for our real lives in retirement.
  • We get divorced and aren’t sure how to make unemotional decisions.
  • We make investments – in a business or real estate or other venture – that we haven’t vetted with a competent professional within the context of our whole financial picture.

These are the obvious ones.

Less Obvious, But Equally Damaging

That said, we would like to add a few more that may be less obvious.

 

  • We get incomplete advice from well-meaning experts who work in silos, knowledgeable in one field but unaware of the intricacies of others. For example, investment managers and financial planners are not experts in real estate, and mortgage advisors don’t know financial planning and investment management.
  • We don’t make sure we’ll have income when we retire. Instead, we aim for having a high net worth – but don’t realize that our high net worth is tied up in real estate, and the only way we may be able to get the money we will need to live on will be to sell our house.
  • We buy a real estate investment without knowing how it fits into our portfolio or financial life, often erroneously thinking that we can’t go wrong with real estate.
  • We make big financial decisions, often committing hundreds of thousands of dollars, without the ability to see the impact of these decisions in varying “what if” scenarios that could tell us how they will affect us in 10, 20, 30 years or more.
  • We put extra money into a down payment on real estate, without reviewing the financial outcome at varying levels or what that money might do if it’s invested elsewhere for the sake of more other returns.
  • We sell stock options without considering the tax implications, and the sale ends up costing thousands of dollars that could have been avoided.
  • We invest in a 401(k) without any understanding of the investments we’ve chosen or any expert looking at how it’s being invested.

Sound Familiar?

You get the idea. You may even see yourself somewhere on these lists. Real estate, for one, is a place where many people mess up. It can be a huge deal. You need expertise to guide you – because it’s also an area you can invest in successfully.

In fact, you have many ways to get your financial life right. If you can get a complete picture of where you stand financially, and plan accordingly, you can minimize the mess-ups.