Seeing you succeed in your financial life is our greatest joy as financial professionals. There is simply nothing better than watching a client set a goal and giving them the tools to accomplish it. The rewards are so rich; kids going to college, the peace of a secure retirement, the ability to purchase a home that you love. When we see these things happening in our clients’ lives, we celebrate right along with them.
On the flip side, we’ve also witnessed clients make decisions that aren’t in the best interest of their financial future, decisions that often lead to a very bumpy ride.
There are lots of ways to make it harder to reach financial goals, but here are the three that really set you back:
When you use your emergency fund for things that aren’t emergencies.
It takes a lot of diligent work to build an emergency fund and it’s there for a good reason – to protect you when the going gets rough. Remember the Great Recession, when unemployment was sky-high and the ability to get a good job in your chosen field was really hard? That could happen again, or it could be something else, like an illness or a family tragedy. When you rob your emergency fund for non-emergencies, you are taking a very real risk that puts your financial future in jeopardy. As much as we would all love to take a vacation or splurge on a new car…those aren’t emergencies. Those are things that should be met with planning and advanced savings.
When you cash out your 401k, IRA, Roth IRA, etc. before retirement.
The fact is, most of us are going to need to work really hard to save enough to fund a healthy retirement. The majority of people are behind in retirement savings and the reality of what retirement looks like when there isn’t enough money isn’t pretty. Cashing out your retirement account, however big or small, is a bad decision. First, there’s the likelihood that you’re going to pay taxes and penalties. Ouch. Second, you’re robbing your future self of a lot of money. Think about the power of compounding growth and tax deferral. Giving those things up is a costly decision.
When you pay for things with credit cards that you can’t afford.
Borrowing is a good idea in very specific situations, like buying a home or investing in your future via a college degree. Borrowing is not for buying sweaters, vacations, boats, or sweet sneakers. Never put the purchase of consumer goods on credit cards when you don’t have the money to pay off the bill when it’s due. Credit card debt is a very expensive spiral. The cost of the loan to buy the shoes is exorbitant. As credit card debt grows, it gets harder and harder to escape and has a very real impact on your long-term financial success.
As Certified Financial Planner Practitioners™, our greatest joy is helping you create financial success through consistently good decisions and strategies. We would be delighted to help you avoid costly mistakes and accomplish the financial goals that are truly important to you.
Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.