Top 3 Financial Planning Mistakes To Avoid – An Expert’s View

Our Chartered Financial Planner, Leonard Birnie, shares his insights into most common financial planning mistakes to avoid if you want to protect your assets…

I talk to clients every day about efficiently saving their money and planning for the future. When I first meet clients I get the opportunity to look at their current financial plan, but just as importantly, I get to look back and understand how they have arrived at their current position.

Experience has shown me that clients often make these common financial planning mistakes early in their saving habits and financial decisions.

One of our advisers weighs in on the most common financial planning mistakes to avoid

1. Not understanding how much you need and when you need it

Clients often talk about saving for a rainy day, but sometimes don’t have clear ideas about when the rainy day is and how much the rainy day will cost.

I often ask clients, “Why are you saving this money?” The most common response is, “I’ve always been taught to save.” Whilst this is not an inherently bad answer, it does highlight that the majority of us save without understanding specifically why we are saving!

If you don’t understand the above, how can you begin to plan for your financial future?

A few simple solutions to this are:

  1. Understand when your “rainy day” fund might be used. Is it:
    a. When your children move out/finish university?
    b. When you make your last mortgage payment?
    c. When your work fundamentally changes and you begin seeking a career change?
  2. Understand how much money you want when your rainy day comes along by thinking about what you will need to buy/fund at that particular point in time.

2. Not taking advantage of tax-relieved savings / employer sponsored savings

Many clients think of employer pension plans as an additional expense that comes out of their wage each month, but the best way to think of it is as a salary uplift being put away for your retirement.

Do not opt out of employer pension schemes; even the smallest contribution can compound up into an additional source of revenue in retirement.

Take the free money!

3. Not thinking long-term

“Get-rich-quick schemes are for the lazy & unambitious. Respect your dreams enough to pay the full price for them.”

Steve Maraboli

The above is a sentiment every Financial Planner will echo; individuals need to pay close attention to their financial plan and their financial future. After all, it’s their future!

Be prepared to put in the emotional effort and think about retirement. What is important to you and your family and what does your ideal retirement look like?

When you buy an investment be prepared to hold that investment for 10 years. When you buy an investment fund and it goes down, great – buy more of it, it’s cheaper than it was previously!

Do not watch the price of your investment daily, it detracts from your end goal. Always think longer-term.

Contact us

For further advice on your financial planning, as well as an expert’s opinion on financial planning mistakes to avoid, please contact Leonard Birnie at leonard.birnie@taitwalker.co.uk.

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