5 Money Mistakes and How Best to Avoid Them

Over the years, Octavia Wealth Advisors has helped many investors navigate their way through various life stages and achieve their financial goals.

An important part of that journey has been sharing ways to prevent, or recover from, mistakes that could get in the way of their success.

Diligence is key to financial stability, and although every investor is different, there are a few missteps we see more frequently than others. Here are five common mistakes we’ve seen investors make when managing their money and how you might be able to avoid them.

1. Ignoring Long-Term Goals. Though investors typically cite “long-term growth” as a top priority, we find folks often lose focus during major market fluctuations or when a new investment fad comes along. It may be tempting to try to time the market or to pursue the latest hot tip, but this could have a negative effect on your portfolio. It can put your retirement goals at risk or derail your progress toward important milestones, like saving for a house or a child’s education. Knowing you have a portfolio that’s been tailored to your individual needs, aspirations, and time horizon can help you say no to chasing returns and keep you on track with both long- and short-term objectives.
2. Mismanaging Debt. Holding large amounts of debt, especially high-interest debt, can be an expensive and difficult situation to reverse. According to Business Insider, Gen Xers (born between 1965 and 1980) currently carry the highest average debt at $157,556. But millennials (1981-1996) aren’t far behind, with an average debt of $125,047; and both the baby boomers (1946-1964) and the Silent Generation (1928-1945) are entering retirement with debt that can keep them from their goals. If you feel as though you’re drowning in debt, a payoff plan is essential. Of course, all debt is not created equal, so it’s usually best to focus first on the bills that are really dragging you down. If you can put more toward the credit card or loan with the highest annual percentage rate (APR) each month, you’ll have a much better shot at progressively paying down your debt. Or, if you can qualify for a reasonable interest rate, you may want to consider a debt consolidation loan.
3. Underestimating Inflation and Taxes. Some costs can chip away at your bottom line so gradually, you might not even notice that you’re losing money. The effects of inflation aren’t always as obvious as they’ve been in the past couple of years, for example. But even when costs are rising slowly, inflation  can shrink your savings and reduce your purchasing power. Thoughtful, proactive tax planning  is also critical: Without it, your savings could be vulnerable—especially if tax rates rise in the future. An experienced financial advisor can help you find these and other hidden costs that may keep you from achieving your goals.
4. Emotional Decision-making. Emotions like greed, panic, regret, and the fear of missing out (FOMO) can easily undermine a solid investment plan. Not making rash decisions based on market swings can help you minimize the negative impact to your portfolio and stick to your financial plan. If you haven’t done so in a while, it may be a good time to revisit your overall tolerance for risk. An Octavia wealth advisor can help walk you through the tools we use to measure  an investor’s ability to handle risk, both emotionally and financially. We can also stress-test your portfolio to identify and help mitigate your exposure to potential risks. This will enable you to feel more confident about where you’re headed, despite ups and downs in the markets and the overall economy.
5. Lacking a Solid, Comprehensive Financial Plan. Some investors may believe they’re fine just winging it when it comes to managing their money, or they might think  they can’t afford professional  guidance. But financial planning isn’t just for the wealthy or those who are nearing retirement. A well-defined plan tailored to your individual needs and goals can help provide structure, direction, discipline, and resilience against volatility and other risks—no matter where you are on your financial journey.

Let’s face it, things may happen over which you have no control—in your personal life and in the bigger world around you. But it’s helpful to focus on what you can control. One of which is to seek guidance from a knowledgeable financial professional who can help you avoid potential obstacles and make the most of future opportunities. Schedule time now with an Octavia wealth advisor to discuss how your financial plan can help you achieve a better chance of long-term success.