The 5 Biggest Financial Mistakes I See

Preston Rosamond |

Being a financial advisor has afforded me the luxury of evaluating many individuals’ financial portfolios. So I’ve been able to uncover patterns in the financial mistakes I have seen over time. Understanding these most common mistakes and taking action to avoid them can go a long way in benefiting your portfolio and overall financial situation.

1. Not Understanding the Value of Diversification

Diversification is a safety strategy to reduce your exposure to risk by spreading out your investments among different industries, markets, and sectors. If you are diversified, you probably have investments across platforms like index funds, bonds, real estate, or CDs. For example, investing in index funds like the S&P 500 allows you to easily invest across many different industries so you’re not banking on any one industry to give you the growth you’re seeking.

Not understanding the value of diversification in your financial decisions means you risk the potential of huge losses if your one or two investments tank. It’s the equivalent of putting all your eggs in one basket. If that’s your current strategy, you risk being at the mercy of market fluctuations that are bound to happen over time. 

Diversification helps shield your assets as this strategy allows your portfolio to tolerate any one market or industry or stock crashing; your entire asset collection won’t also crash. We can help you evaluate your level of diversification and find ways to diversify your money even further, if need be. 

2. Not Having a Solid Retirement Income Plan

Creating a solid retirement income plan is something many of us neglect. A recent study found that 27% of Americans are facing retirement without savings to support them. If you put off creating a retirement plan, you may have to sell assets like your home, business, or items of value that you treasure. You may end up being a burden to your children or grandchildren. The inability to pay required taxes during your retirement leads to financial strain. 

However, you can start now by meeting with a professional financial advisor who has your best interests in mind. An advisor listens to your goals for your retirement life, assesses your retirement income potential, and helps you craft a plan for your future. That’s a great way to avoid mistake #2. 

3. Not Having a Comprehensive Estate Plan

A comprehensive estate plan includes designating beneficiaries, a durable power of attorney, a healthcare power of attorney, and a guardian of minor children. It also includes a statement of your wishes in case you pass away or become incapacitated. 

There are negative ramifications if you are not able to care for yourself or make financial decisions and you don’t have an estate plan in place. In these situations, judges make these decisions for you and your family. If your estate does end up in probate, your loved ones face taxes, fees, and confusion as they try to convince the court who ought to have ownership or control of the assets you left behind. 

Preparing ahead for the division of assets and your legacy is imperative to avoid mistake #3. 

4. Not Revisiting Your Level of Risk

The amount of risk inherent in your investment choices should change as your circumstances change. Every investment includes some level of risk. For example, most stocks come with a higher level of risk due to short-term fluctuations but also provide a higher potential for returns. On the other hand, CDs and savings accounts come with steady growth over time and less fluctuation—and therefore less risk.

Earlier in your working life, your investments can withstand a higher level of risk. However, when retirement is within five to ten years, it may be time to lessen the risk load in your portfolio. If there is a market crash, it would be more difficult to regain losses before your paychecks end and your second act begins. To avoid this mistake, it pays to partner with a professional financial planner who can assess your risk level and adjust it depending on your retirement time frame. 

5. Not Planning for Long-Term Care Costs

No one likes to think about being unable to care for themselves later in life. You may think you’ll never need this type of care. You may think you can’t afford it. You may not know your options. But denying the possibility could cost you or your children a lot of money. 

Long-term care insurance helps with expenses not covered by regular health insurance. The daily aspects of life you may need help with later in life may include bathing, dressing, getting in and out of bed, and preparing daily meals. LTC insurance policies often cover these types of expenses whether you are living at home, in an assisted living facility, or in a nursing home. Thinking about possible long-term care costs now, while you’re still in your working years, can save you a lot of money later on. Otherwise, you risk becoming a financial burden to your family, being in a living situation you wouldn’t have wanted if you had more flexibility and insurance, or not having a legacy to leave your descendants because LTC costs can easily drain your savings. Consider this: The monthly cost of a private room in a Texas nursing home facility is a whopping $7,524.

We Can Help You Avoid These Financial Mistakes

Now that you are aware of the biggest financial mistakes people make, you can take action to avoid them. Working with us at The Rosamond Financial Group is a great first step. Our professional advisors have an eagle eye for spotting and correcting these mistakes. We can work with you to make smart decisions regarding your assets and set you up for a sound financial future for you and your heirs. Book a free introductory meeting online! And see what clients are saying about working with us.

About Preston

Preston Rosamond is a financial advisor and the founder of The Rosamond Financial Group Wealth Management, LLC with over two decades of industry experience. He provides comprehensive wealth management and financial services to successful business owners, corporate executives, and affluent retirees who enjoy simplicity and seek a professional to help them pursue their goals. Preston personally serves his clients with an individual touch, a sincere heart, and his servant’s attitude is evident from the moment you meet him. Learn more about Preston or start the conversation about your finances with him by emailing solutions@rosamondfinancialgroup.com or schedule a call on his online calendar.