Reflections on 35 Years as a Financial Advisor
Dumb Tax Mistakes:
- Paper-filing your return — think SLOW and keypunch errors!
- Fudging the numbers
- Failing to file or filing late — think BIG penalties
- Using the IRS as a savings account
- Not taking deductions you are entitled to in the mistaken belief it will decrease your chances of an audit — guess again!
- Turning long-term capital gains into ordinary income by not waiting a few days
- Buying municipal bonds because they are “tax free”
- Doing anything just because it is tax favored or deductible
- Failing to do tax loss harvesting with your portfolio — think interest-free loan to the IRS
- Assuming tax rates will go down — think YOU GOT TO BE KIDDING
- Having large life insurance policies without a Irrevocable Life Insurance Trust (ILIT) — think GIFTS TO THE IRS
- Not doing annual gifting if your estate will be taxable
Dumb Investment Mistakes:
- Not diversifying — think roulette!
- LEVERAGE, LEVERAGE, LEVERAGE
- Not understanding investments — think four years in college to understand how to make a living and not investing time to learn the fundamentals of investing
- NOT HAVING AN INVESTMENT PHILOSOPHY
- Expecting investments to conform to “your” timetable
- Putting all your investments in a country with only 4% of the world’s population and a mountain of debt — think USA.
- Ignoring emerging markets
- Setting unrealistic expectations on investment performance
- Assuming real estate, wages, stocks and investments will continue to go up — think GRAVITY
- Using your home as a credit card
- Not using 529 Plans for your children’s college savings — think TAX FREE
- Following the headlines to inform your investment decisions — think of a boy with a Yo-Yo walking up the stairs!
- Complacency — I know it is a pain to get rid of those losers but …
- Failing to think 'long-term' — successful investing is about slow and steady accumulation of assets over time
- Holding investments to get long-term capital gains treatment without considering market risk
General Financial Mistakes:
- Impulsive decision making
- Spending to your earning level — think OOPS!
- Not staying on top of declining interest rates to refinance loans — the banker is not going to call you!
- Assuming you have to refinance to get a better rate because your mortgage has been sold on the secondary market
- Deciding that vacation home is just what you need, then having to finance it!
- Failure to carry adequate life insurance
- Failing to have a will — think CHAOS and LOTS OF FEES
- No estate plan to minimize taxes — think GIFTS TO THE IRS
- Ignoring reality — hey, a budget is just reality
- Thinking Social Security will be there for you — HELLO!
- Not setting financial goals and sticking to them
- Not reviewing your financial plan at least annually
- Putting off saving for retirement until your later years — think $2,000 a year for 25 years earning 5% grows to almost $100,000
- Lottery mindsets
- Allowing emotions to influence your financial decisions
- Not living within your means
- Having no rainy-day fund
- Living on credit
- Not waiting to purchase something with cash
- Not saving when times are good
- Trying to keep up the Jones'
- Keeping up with the Jones'
- Not having adequate health insurance
- Not teaching your children to be financially responsible — think “The Return of the Dependents”
- Not establishing good credit
- Missing a great educational opportunity by not learning from your financial mistakes
- Following the blind...advice from friends who may know slightly more than you
- Loaning money to family or friends
- Acting as a co-signer
Other Financial Mistakes:
- Skipping a loan payment (Skipping a payment now only adds a payment at the end and you pay a lot more in interest.)
- Extended warranties
- Payday loans
- Incurring prepayment penalties without obtaining a correspondent interest benefit
And let’s not forget Tiger!
Tiger Woods tried to sell an image while privately maintaining a completely opposite life style. This resulted in the loss of endorsement deals, a drop in his game and a very expensive divorce. Talk about financial disasters.
Please
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