You’re likely well on your way to (hopefully) keeping your 2018 resolutions, but you may also benefit from looking back on the past year to see where you may have fallen short financially. Maybe you spent too much on things you didn’t need, made an unwise investment, or got behind on your savings. Now is the time to make a plan to avoid repeating the mistakes that you made last year, many of which were likely made inadvertently.
Here are four examples of financial missteps that you may want to focus on correcting in the weeks and months ahead.
Jumping on the bandwagon. When a particular investing trend, asset class or individual stock becomes hyped, try resisting the temptation to immediately move your money there.
[See: 10 Investing Themes to Remember for 2018.]
Take bitcoin, for example. With its surges in price over the last year (and subsequent falls), the cryptocurrency is constantly in the media and there have been many stories of people using their savings or even taking out loans to buy it, often at its peak. Instead of rushing to jump on the bitcoin bandwagon, think first about how much you would truly be willing to lose, and then invest that at the very most.
Similarly, it’s also unwise to pick single stocks or sectors based on their popularity or recent performance. Doing so is primarily a game of luck, and is difficult to do successfully for even the most experienced financial professionals, who typically have more resources than the average investor. Instead, it’s more prudent to focus on lowering volatility and diversifying your portfolio, so that you will be more prepared for market shocks.
Putting off estate planning. Conversations about estate planning are inherently difficult, making it easier for people to delay them. Yet a will and other estate planning documents are critical not only to safeguard your assets, but also to protect your loved ones and help minimize confusion and arguments when the inevitable occurs. Once your documents are created, it is advisable to review them with your team of financial professionals and your family once per year on average to ensure they remain aligned with your wishes and other considerations such as your health, current finances, and relationships. Doing so will help provide peace of mind for both you and the people you care about.
[Read: 3 Tips to Diversify Your Portfolio.]
Failing to contribute enough to retirement. Contributing a portion of your income to a retirement account is one of the best ways to secure your financial future. If you aren’t already doing this, start now. If your company offers an employer match, contribute enough to receive the maximum match as it’s essentially free money. In cases where your firm doesn’t offer a 401(k) plan, there are other retirement savings options such as an individual retirement account (IRA).
On the other hand, if you have already been contributing to a retirement plan each month, consider increasing the percentage of each paycheck that you put in. It may also be wise to contribute to more than one account in order to diversify your tax treatments, which could be helpful in the event of an emergency or other unexpected event. For example, Roth IRA contributions are made with after-tax dollars so you do not incur a tax penalty if you need to make a withdrawal from the account.
Ignoring your long-term investment strategy. Markets are at all-time highs, but there will inevitably continue to be unpredictable events in markets and politics around the world. However, you should remember that these types of events have a short-lived effect on markets and it isn’t advisable to play them into your portfolio. Instead of selling off stocks in reaction to headlines about short-term events — which can in turn lead to fees and unrecoverable losses to your portfolio — continue to maintain your quality investments that will support long-term financial stability.
[See: 8 Cheap ETFs to Build Your Nest Egg.]
If you start feeling overwhelmed, it never hurts to consult a financial professional who can help guide you through the process of correcting any previous mistakes. Of course, this all takes work and patience, but making gradual progress throughout the year will help increase your financial independence as well as your long-term wealth and security.
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4 Financial Mistakes to Avoid Repeating This Year originally appeared on usnews.com
