What’s the biggest financial mistake you can make? Choosing the wrong investments? Are you waiting too long to save for your retirement? Underestimating the costs of retirement? All of the above are reasonable, but the biggest mistake you could make is not looking at your financial situation holistically – that is, not integrating all of the elements of yourself.
Consider some of them:
Your Perspective on Helping Your Family – Your decisions about helping your family are clearly going to be an important part of your financial strategy – and this is true at virtually every stage of your life. When your children are young, you will need to decide if you are going to put money aside for their college education, and if so, how much and in what vehicles to invest. When they are young adults, you may also need to decide how much financial assistance you are willing to provide for things like a down payment on a new home. And when making your estate plans, you’ll need to think about how to distribute the assets to your children, grandchildren, or other family members.
Your Personal Beliefs – As someone with civic, ethical, and moral concerns, you want to make a positive impact on the world around you. And that’s why you may feel compelled to donate to charity throughout your life and then make philanthropy part of your legacy. To achieve these goals, you’ll want to include giving techniques in your financial strategy today and your estate plans for tomorrow. Of course, for the estate planning aspect, you will have to work with your tax and legal advisers.
Your Life Purpose When You Retire – When you retire, you may be leaving a career path, but you are also entering a world of possibilities. How will you define and experience your new sense of purpose at this point in your life? Are you looking to broaden your horizons by traveling the world? Do you want to give more to the community by volunteering? Can you spend more time doing the hobbies you enjoy? Each of these choices will have different financial implications for how much you will need to accumulate for retirement and how much you will need to withdraw each year from your retirement accounts, such as your IRA and 401 (k).
Your Health – Your physical and mental health can play an important role in your financial plans and prospects. At the most basic level, the healthier you are and the better you take care of yourself, the lower your healthcare bills are likely to be during retirement, which will affect how much you need to set aside for healthcare. . And you may also need to prepare for the costs of long-term care, which can be huge – in fact, a private room in a nursing home can easily cost $ 100,000 a year, according to insurance company Genworth. .
It can be difficult to weave all of these into a single, unified vision, so you may want to enlist the help of a finance professional. But, in any case, be prepared to take a holistic view of your situation – because when developing a lifelong financial strategy, every part of your life matters.
This article was written by Edward Jones for use by Joe Parlavecchio, CFA, CFPÂ®. Visit https://www.edwardjones.com/joseph-parlavecchio for more information.