Scary Financial Mistakes: Leaving Important Details Out of Your Financial Plan

Oct 1, 2021

By Eric Estelle, Manager, Financial Planning & Marketing

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Scary Financial Mistakes

For most of the country, October signifies a transition. Jackets come out of storage, trees put on a colorful show, and everything gets covered in pumpkin spice. It means the holidays and a new year are fast approaching as well, but October is probably most famous for Halloween. Through costumes, haunted houses, and home decorations, we poke fun at the things that frighten us. It is unlikely you will find any costumes or decorations that represent the scary financial mistakes that will be discussed here this month, but you should avoid these missteps as you would werewolves, zombies, and other Halloween horrors.

One such scary financial mistake is leaving important details out of your financial plan. This is especially true for anything that might have a material impact to the results. In the same way your doctor cannot provide an accurate diagnosis without a complete medical history, your financial advisor cannot provide an accurate financial plan without a full picture of your finances. This means that no matter where assets are held, or how far into the future a goal may be, it should all be included in your financial plan with as much detail as possible.

For example, it is common to have investment accounts and IRAs held at more than one brokerage firm, bank accounts at several banks, 529 college savings accounts, and an employer sponsored plan like a 401(k). When assets are spread around like this, it can be time consuming to gather the necessary information, but it is worth the trouble. If you leave an account out of your financial plan, because it is held at a different financial institution, the results of your financial plan will be skewed and much less useful. Likewise, if you include all of your accounts, but do not provide details on the accounts’ investment allocations, the financial plan will again be inaccurate. Over time, these inaccuracies can lead to an unsuitable investment mix or missing the mark on retirement and savings goals.

In addition to providing details on all assets, it is just as important to include all financial goals you want to achieve. In the pre-retirement period, think about anything that might require you to make withdrawals from your portfolio, or cause a temporary pause to annual retirement savings. For retirement, consider all spending needs necessary to fund your everyday expenses and lifestyle.  Perhaps less obvious, you might want to discuss with your financial advisor any plans to start a family or add to your family, the potential of caring for an aging parent, or moving to a different state as these sorts of events will certainly have an impact on your financial plan.

In short, the more complete the information you provide going into your financial plan, the more accurate and valuable the financial plan will ultimately be. Your financial advisor needs to see all the pieces of the puzzle to ensure they fit together properly. This will help to avoid mistakes and capitalize on opportunities. A comprehensive plan requires a significant amount of time and effort from you and your financial advisor, but the reward of having a clear path toward meeting your goals is well worth the work required.

As the month continues, you can look forward to learning about several other scary financial mistakes. Avoid these mistakes and you might save yourself from being haunted by your own financial phantoms.