1. Too Little Too Late
Most people only go through retirement once in their lives. Many financial planners go through it on a weekly basis. Too often, planners see what happens when people face retirement with too little money to sustain a comfortable retirement and too little time to make up the deficit. Even those who have sought advice earlier in life are sometimes reluctant to commit to a plan to reach their retirement goals. They cite mortgages, renovations, overseas travel, school fees and not planning to stop working as reasons to put off seriously investing in their long-term future.
The combination of compound interest and Government incentives favour the tortoise over the hare.
2. Paying Unnecessary Taxes and Fees
People generally don’t want to pay more tax than they need to. But they quite often do. Taxes can act as a drag on your efforts to achieve your financial goals.
Be aware of these taxes:
- 15% tax on earnings in super for clients over 55
- Excess contributions tax for superannuation payments
- Potential salary sacrifice contributions taken as income
- Capital gains tax on short-term investments
3. Falling for Investment Fads
Investing can be very emotional. Envy and greed often tempt clients to chase hot asset classes, share market sectors, managed funds or property schemes. History shows that this rarely pays over the long term. Tech stocks, speculative mining stocks and highly leveraged property investments have all caused financial hardship for a large number of retail investors. You need to take the emotion out of investing and invest in accordance to your attitude to risk and understand the strategic investment framework that is appropriately diversified and tailored to your individual risk appetite.
4. It Won’t Happen to Me
You are often either unaware or unwilling to admit that risk exists in your life. You need to make sure that the correct level of insurance is held and that you have a Plan B. Job losses and illness can cause major financial strain if not correctly accounted for.
5. Failing to Plan
As the old saying goes, “if you fail to plan, you plan to fail”. You are very unlikely to achieve your major life goals, if you fail to first articulate those goals and secondly put a framework in place to achieve them. Goals often lie under the surface in a person’s sub-conscious. You need to identify and articulate these goals, this will allow you to visualise what success looks like. If your goal is to see the world, you need to visualise stepping on the plane. If your goal is to pay off their mortgage, try to visualise what it will feel like making your last payment. A vision will provide more motivation to achieve those goals.
Financial Planning advice is most commonly measured as good or bad depending on the performance of the investments. This is a common mistake. Performance is a measure of the investment, not the advice you are receiving. Investment advice is how your adviser goes about choosing the investments for you.
Financial Planning is getting the tools and advice you need to achieve your goals.
Do you need Financial Planning advice? Please call me on 07 4771 4577.