Financial Advisors See These 5 Wealth Blunders Every Day

Today we're going to be talking about the five biggest financial mistakes you can make. And being registered investment advisors, we see this sort of thing all the time. The one that we want to start out talking about is neglecting emergency savings. Steve, can you tell us a little bit about how this is a big blunder that people make and why a lot of people might neglect it? Yes, you need to put away money, probably anywhere between three and six months of living expenses. What happens so many times if you're investing everything that you have, you don't have anything for a contingency fund or emergency savings, something will come up unexpected and you may have to liquidate your investments and it can be at the wrong time. Absolutely. And people will oftentimes encourage people to invest and invest and invest as soon as you can. But if you don't have an emergency fund set up of three, four, $5,000 to where if your car goes out, if you need to fix your air conditioner and it puts you in the poor house or you've got to take money out of your Roth IRA, it can really put you in a bad spot if you don't have money saved up to be able to take care of something in that situation. Can you tell us about the dangers of high interest debt? High interest debt is a no-no. That's definitely something that you do not want to do. It gets very, very difficult when you have a credit card that's charging 20% plus per year. What you'll end up catching yourself doing is just paying the interest and not touching the principal. So it'll string out how long you'll have to pay this and it really, you start paying back a whole lot more than what you borrowed. Yeah. And credit cards, payday lenders, title loans, those kinds of things are all high interest debt that absolutely should be avoided at all costs. Another thing that we would like to talk about and we've mentioned it a little bit already is delaying retirement contributions. If you haven't set up an emergency fund, if you haven't gotten yourself out of high interest debt, maybe that's something that you should wait on. But as soon as you possibly can, you need to start making contributions. Steve, have you ever seen a good example of somebody following this? Because really we see a lot of bad examples. Yes, if you can, it's better to start making contributions as soon as you can. The younger, the better. I've made this illustration so many times with people. If you start at 20, if you put in $5,000 one time at age 20 versus somebody that starts at 40 and they put in $5,000 a year, the one that put in at age 20 is going to have more money at retirement when you compute at the same interest rate. So starting early with retirement is definitely something that you want to do. When you start prolonging this, it is so hard to catch up and you'll eventually get to an age where you cannot save enough money for retirement. This next one is a little bit different from what you might hear on most financial channels, but divorce is a huge financial blunder that somebody can make. Think about it. If you've had your money compounding in an IRA account for 30 years and all of a sudden you get divorced and you've got to give up half of it, that's a huge deal. Can you tell us a little bit more about that? Sure. Grace and I had a client, it wasn't just maybe six months ago, that was married for a good long time, had saved up in his 401k about a million dollars. He thought because his wife was doing things that she shouldn't be doing that he'd be able to keep all that 401k. But eventually when it came down to it, he had to end up giving her half of it. So he took about a half a million dollar haircut. And especially as you have gotten older, it's very, very hard to recoup that kind of money. And that leads us to our biggest financial blunder and it might be common sense but we're going to talk about it anyway. That's going to be spending more than you earn. There's a biblical principle that says that you've got to count the cost and that applies to everything. It applies to money, it applies to time, but this is a financial channel. So can you tell us about how big of a mistake it is for somebody not to make a plan and figure out how to balance their books? Well, Grayson, if you are spending more than you earn, you never will be able to develop a net stay. You never will be able to increase your net worth. You'll never get to a place really where you can retire. So spending more than you earn is one of the biggest things that will handcuff you and your future. If you want it today, you're not going to have it tomorrow. If you want it down the road, you're not going to have it today. So those that are spending right now more than what they make, they're having it today and they're not going to have it down the road. Well, there you have it, folks. These are things that you should avoid. If you're able to do the inverse of all of these things and follow biblical financial principles, you should be able to be a good steward and be able to give generously and also have enough to provide for your needs down the road. So follow these instructions and don't stray from them and you should be wise and have a good rest of your life.