Lisa MintoAssistant Vice President - Personal Financial Planning
Pamela LewisVice President - Investment & Client Services
Toni-Ann Neita-ElliottAssistant Vice President - Personal Financial Planning
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Wayne WalkerVice President - Operations
Financial Missteps to Avoid
Learn all you can from the mistakes of others.
You won't have time to make them all yourself.
Today, we are discussing financial missteps that many people wish they had avoided. You may have made one or two of them, and this is not unusual. However, seeing other’s mistakes should serve as precautionary tales for us. Over the years, clients have had various experiences that have shaped their outlook. Here are just a few….
Investing in things that you don’t understand. So many people have been caught in this particular situation. It is really important to understand investments that you make before committing. This will sometimes cause you to miss out on opportunities, I acknowledge that, but that may still be better than jumping head first and later regretting the investment. Take time to understand who and what you are giving your funds to, as well as all the accompanying risks. While it may feel good to blame Tom, Dick and Harry, unfortunately, blaming them won’t usually return your funds.
Acquiring expensive assets. This is really not about acquiring assets that cost a lot of money, the real issue here is the maintenance of those assets. You may have been admiring something, a car, a house, or whatever it is, for a long time and you finally have the money to get your little dream. However, make sure that you do all the research that you can. Many people can tell you about the nightmares they have had when buying an unreliable car, or one that is horrendously expensive to maintain. Unfortunately, there are some assets that even if you were to get it free of cost, you may not have the kind of funds necessary to maintain it.
Making decisions when you are emotional, particularly when you are grieving. If you have just suffered loss, even if you think it is not affecting you overly, please be careful of making any big, life-altering decisions at that time. Making bad decisions can have long term impacts on your finances, even on your health and sometimes it affects your family members negatively.
Making all your accounts joint. While it is important to have some of your accounts joint, depending on your situation, it is not a good idea to leave yourself completely vulnerable. If someone could clean out every single one of your accounts and you were left penniless, that would place you in an untenable position. This is particularly important if you suspect that your spouse is not as committed as you are to the relationship. Another individual could become the recipient of all your hard-earned money.
Listening to the wrong sources for your information. Be careful who you go to for advice. Many people depend on others for advice who have absolutely no expertise in the area. How many doctors can identify with this? We have a medical problem and we go to everyone else for advice except our doctor! Conversely, you may be going to your doctor and asking for financial advice. While many doctors are successful investors, it is important to seek the experts in their fields when advice is necessary.
Predicting your death. You really don’t know when you are going to die, unless you are planning on suicide. It is therefore not a good idea to make bets around this number. Yes, you may be in your seventies and perhaps other family members didn’t live very long, but you may prove to be the exception to the rule. So, don’t start distributing all your assets based on false assumptions. If you are going to assume, make the assumption that you are going to live to be one hundred years old and plan accordingly!
Buy not rent. Lastly, if you can purchase your home, by all means do so. It is not easy, but it is better than renting. You would have heard many people say that overtime your mortgage seems cheaper, and rentals will appear more expensive. Even if your situation is good now, you don’t know what will happen later down the line. So as best as you can, try and purchase at least one home, your dependents will thank you for it!
These are not the only missteps possible, in fact, I would love to hear others that you have experienced. Check out our Facebook page. But start by avoiding these!
Yanique Leiba-Ebanks, CFA, FRM is the AVP, Pensions & Portfolio Investments at Sterling Asset Management. Sterling provides financial advice and instruments in U.S. dollars and other hard currencies to the corporate, individual and institutional investor. Visit our website at www.sterling.com.jm Feedback: If you wish to have Sterling address your investment questions in upcoming articles, e-mail us at: firstname.lastname@example.org
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