Top Ten Money Mistakes
– Dave Letterman eat your heart out!
1. Planning procrastination If you are 25 to 35 years old you have time on your side to allow your money to grow. At 50 + you lose that time. Don’t waste any more time waiting – call your financial planner today!
2. Lost buying power Make certain that you calculate inflation into retirement or savings plans. If you don’t factor inflation into your objective you will be short on funds for retirement.
3. Indifference to the need for life, critical illness or disability insurance This counts in retirement as much and perhaps more as it does during your work lifetime. If someone counts on your income for support you need life insurance. If you become disabled and cannot work – who is going to pay your bills. If you contract a serious illness – how are you going to pay the extra medical expenses. Some of these are examples of the real life need for insurance. Like as not big brother cannot take care of you or your family as well as you. Critical illness insurance is win-win when return of premium is included.
4. Too much debt This is a real twist on the day’s news events surrounding the “credit crisis“, however it is never more true than today. The more interest you pay on debt the less income you have for other things. If you have to borrow try hard to make the interest tax deductible.
5. No RRSP or TFSA Notwithstanding the investment medium there is no better way to save than first – getting a tax refund on your contribution and second – having the value of the RRSP increase on tax deferred basis. Maximize your RRSP contributions. Utilize the tax free status of the TFSA to maximize savings.
6. Not reviewing your investments Have you discussed your investments lately, with your financial planner. Insist on an annual review of your investments and know where you are headed – after all it is your money.
7. Storing your money in the bank Fixed interest accounts and bank accounts earn very little. Some segregated funds offer the upside of the market while protecting capital loss on the downside. Mutual funds do not offer any capital protection.
8. Trying to time the market Market trading is a full time job. People make money in the market everyday but they work hard at it. Leave the market trading to the professionals.
9. Switching funds to often Stay within a family of funds to reduce deferred sales charges. Look for investment trends – see number eight.
10. Overreacting to market gyrations Many people get frightened when the market drops and pull their money out (statistics support this fact). Buy low and sell high – see number eight.
Red Adair had a favourite quote: If you think hiring a Professional is expensive ‐ wait until you hire an amateur. James Kew is a Financial Planning Professional in Sherwood Park at 1 -800-810-7526. All Financial Planning advice should
only be undertaken after consultation with a Financial Planner who is a member of Advocis or the Canadian Association of Financial Planners.