In an article entitled “Steering clear of life’s roadblocks to achieve financial goals and prosperity” by Sonya Stinson on Bankrate.com, posted on Jan 12, 2016, she lays out the pitfalls / roadblocks we run into which may keep us from achieving our financial goals, and she provides tips for maneuvering these roadblocks.
When you are in your 20’s: The pitfall to avoid is too much Student Loan Debt. If you borrow too much, these loans can haunt you for decades, and may be a burden on your finances as you get married, purchase a home and save for your children’s education.
How to Avoid the Pitfall: . “To keep that from happening, beware of those seemingly friendly repayment terms that stretch out for 3 or 4 decades, says Brandon Moss, vice president of wealth adviser management at United Capital Financial Advisers headquartered in Newport Beach, California.”
“Financial advisers also say a good rule of thumb is to borrow no more than the average annual starting salary for workers in the career field you’re pursuing. That way, you’ll be more likely to be able to repay the loan within 10 years and keep the monthly payments at a manageable 10% or so of your gross income” says Sonya Stinson.
As I reported in my post from September 21, 2015, the graduating class of 2015, accumulated a little more than $35,000 (average per student). If the average student loan debt is $35,000, there are many who have more than $35,000 in student loan debt.
When you are in your 30’s: There are two pitfalls to avoid in your 30’s. The first is overspending: “This is the decade where keeping up with the Joneses starts to be a problem for a lot of people,” says Greg DeJong, an adviser at Savant Capital Management in Naperville, Illinois, of consumers in their 30s. “It may show up in the price tag of family vacations or camps for children.”
How to Avoid the Pitfall: It’s difficult to do but you should only buy what you can really afford. You need to avoid credit card debt and only charge what you can pay each month in full.
The second pitfall in your 30’s is not having enough insurance: Not having enough insurance can cost you when a crisis occurs.
How to Avoid the Pitfall: Review your insurances such as health, home owners, automobile, and life insurance and make sure that you are adequately insured.
When you are in your 40’s: You are the Sandwich Generation. “You have middle-aged adults sandwiched between aging parents and their kids, having to decide what they should fund first,” says Kimberly Foss, CFP professional with Empyrion Wealth Management in Roseville, California.
You can be tempted to use your retirement money to fund your children’s college, or to help your parents, which would put your own future in jeopardy. When you don’t have enough to retire (because you used your funds for your children’s education or your parents care), you may be putting a burden on your children to help you when you retire. It’s not good for anybody.
How to Avoid the Pitfall: Don’t use your retirement money to fund college or your parents care. If you haven’t saved enough for your children’s college education, you can get student loans for your children. Funding your aging parents is more difficult, but the author of the article says that there are sources out there. You just have to look for them.
When you are in your 50’s: A big concern in your 50’s, as you get closer to retirement, is the volatility of the stock market, i.e. “Stock market jitters”. The pitfall is the temptation to pull retirement money out of the market during a decline, creating losses in your retirement accounts. It can be difficult or impossible to recover these losses. These decisions can affect how much you will have when you retire.
How to Avoid the Pitfall: Greg DeJong, an adviser at Savant Capital Management in Naperville, Illinois advises clients to “hold steady with investment strategies”. “They need to resist the urge to time the markets or pulling money out during the inevitable market downturns.”
A second concern in your 50’s is the loss of your job. In your 50’s, it is more difficult to replace your job. You cannot really avoid the pitfall of losing your job, but you need to be vigilant and more aggressive in trying to replace your job. The longer you are out of work, in addition to the financial burden it places on your current budget, you are also losing time that you could be investing in your retirement plan.
When you are in your 60’s: The author suggests that “piecemeal financial planning” is the concern in your 60’s. “A “silo approach” to financial planning, with a different adviser handling each component separately, is often one of the biggest barriers to financial success in your 60s”, DeJong says.
How to Avoid the Pitfall: “This is really the time to be coordinating investment strategy, retirement planning, tax issues, the estate plan and insurance matters,” DeJong says.
“Larry Rosenthal, president of Rosenthal Wealth Management Group in Manassas, Virginia, says that in this decade, you need to be focused on ensuring your investment portfolio and other sources will produce a reliable income stream during your retirement. “Take a look at your assets, liabilities, income and expenses, and see what you’re on pace for,” Rosenthal says. “See how much you can actually afford during your retirement years.”
If you do not feel qualified to handle your own financial plan, you can go to a financial planner or professional adviser to help you with your plan. If your financial planner suggests changes, be sure that you understand everything they are proposing to you, including fees etc, and you make the decision for any changes, if you feel it is right for you. Don’t just turn your money over to someone to handle for you. There are nightmare stories of people losing their money when they turn over control to someone else. You need to keep control, and you should make the final decisions.
When you are in your 70’s and older: There are two possible pitfalls in your 70’s. The first is Long Term Care. The author stated that “The cost of long-term care has ruined many retirees’ dreams of living out their golden years in care-free comfort. A 2015 Genworth survey found that the median annual cost of a home health aide is $45,760, an assisted living facility costs $43,200, and a semi-private room in a nursing home costs $80,300.”
How to Avoid the Pitfall: The author suggests “Before you reach retirement, factor the estimated cost of health care and long-term care into your financial plan. Consider getting long-term care insurance and taking steps to protect your assets by consulting an elder law attorney”.
I just want to point out that Long Term Care Insurance is very expensive so it may not be an option for everyone.
The second pitfall in your 70’s and beyond is Fraud: Seniors are targeted by financial scams which can threaten their retirement savings.
How to Avoid the Pitfall: The author suggests “This is the time to be on high alert, avoiding isolation, which makes you more vulnerable, and being cautious about giving out personal information”.
To read the full article, click on the following link:
http://www.bankrate.com/finance/smart-spending/steer-clear-of-life-roadblocks-to-achieve-financial-goals-3.aspx
Your Money: Time to Take Another Look 