I’ve looked under A LOT of financial kimonos over the last 15 years, and some financial planning errors are more common than others.
Here are my Top 5 financial planning mistakes most do-it-yourselfers make:
5. WAAAAY TOO MUCH COMPANY STOCK – this is the one we get the most pushback on, but you shouldn’t be gambling more than 10% of your money on picking stocks (or crypto or real estate or any other singular investment). I know your company stock feels safe. First Republic employees felt the same way until this year.
4. UNDERINSURED – let’s get this straight. I hate insurance and I don’t have a single penny more than I have to. But DIY’ers are chronically underinsured. EVERYONE needs long-term disability (aka income protection) insurance, a personal umbrella liability policy, and if you have kids – a term life insurance policy. (Most parents know to get life insurance, but they almost never get enough.)
3. ESTATE PLAN-LESS – you need an estate plan. Full stop. (And ESPECIALLY if you live in California.) Some people have wills (good job!), but they don’t realize a will is more like a suggestion than a legal document.
2. WRONG EMPLOYEE BENEFITS – Some benefits are great. Some stink. 9 times out of 10, we need to rejigger people’s employee benefits either because they’re paying for ones they don’t need, or missing the ones that are the best deals.
1. CLUELESS ABOUT CASH FLOW – the fast track to NOT financial independence is to have no idea how much you make or spend. At worst, cash flow ignorance leads to credit card debt. At best, it leads to sleepless nights wondering “how you’re doing”.
Thankfully, these are easy ones to fix. #2-5 are the ones you only need to do once.
#1 is tougher because it’s a behavioral change that requires forming a new habit, but with technology these days tracking your cash flow is super easy.
If this made you haha, aha or hmm, let me know!
