man at table looking at computer screen

4 Common DIY Financial Mistakes: When Should You Talk to a Financial Advisor?

Financial Planning, financial advisor San Antonio Aug 17th, 2020 by: Darryl Lyons

There’s more to retirement and financial planning than a lot of people realize.

There’s Social Security questions – when can I take my benefits? When should I take my benefits? How do they work?

There’s your IRA, 401(k) or other retirement plans to consider – how much will I get from each? When should I start taking withdrawals? Are there penalties for taking money out too early? Too late?

There are business-related questions if you own your own company. There are health-insurance considerations and tax concerns. And then there are the basic questions (that often aren’t as obvious as you may have thought) about what you’ll do when you’re no longer working and how you will spend your days in retirement.

When first establishing a financial plan, some people think they can handle it on their own. But as time goes on and life gets more complicated, many of these DIYers change their minds.

So, the real question is, when should you talk to a financial advisor? The answer: Before you get overwhelmed!

A financial advisor can help you manage your portfolio, stay on track financially, guide you to make educated investment and retirement planning choices, and set yourself up to achieve savings goals, among other things. Yet a whopping 99 percent of Americans are estimated to go it alone when it comes to managing their finances, investments and retirement savings.

Why?

Some people have trouble allowing someone else to take even a small amount of control over their finances. Others like to feel like they’re saving money by not outsourcing. We also see people who are overly confident. They may think they can learn everything they need to know by watching videos on YouTube, but this doesn’t make up for years of actually helping families with their financial planning needs and experience with different markets and situations.

Think about it this way: You wouldn’t attempt to rebuild your car’s engine on your own unless you were a trained mechanic. There are important tasks that you would only trust in the hands of an experienced professional, someone who has spent years learning their trade, practicing and perfecting their skill, and following industry changes. In much the same way as you could set yourself up for a more complex engine problem if you tried doing it yourself, some DIY financial planners set themselves up for financial disaster by trying to do it all alone.

At PAX Financial Group, we often work with clients who find this out the hard way. Below are 4 major mistakes people commonly make when they take on their own financial planning … but shouldn’t have.

 

1. Making Emotional Decisions About Spending, the Market and Otherwise

Anxiety, envy, regret, guilt, grief. These may sound like things you might bring up with your therapist, but they’re also common emotions that can guide financial decisions. And more often than not, emotional financial decisions are bad financial decisions.

The designer jeans you couldn’t afford, but they looked so good on your neighbor, you just had to have them, so you bought them on a credit card. Spending your divorce settlement or spouse’s life insurance payout on a month-long trip to Bali. Picking up the tab for an expensive dinner with friends so they think you’re better off than you really are. Freaking out after a bad day for the stock market and unloading your whole portfolio.

These are all financial decisions that are made by letting your emotions run your financial cockpit instead of letting your brain take the helm, or better yet, letting a financial advisor help pilot you away from making irrational/ill-advised/foolhardy decisions.

For your own financial well-being, emotions have no place in any aspect of financial decision-making.

 

An outside perspective can help you make informed decisions about your finances. Contact PAX Financial Group to see how we can help.

 

2. Making Major Decisions After Losing a Loved One

Speaking of that month-long trip to Bali, as wonderful and relaxing as it may sound, it won’t bring your loved one back or ease the pain of your loss. It’s also probably not what your loved one had in mind when they named you as a beneficiary. There are much more rational, productive ways to use a potential inheritance or life insurance proceeds.

After the death of a loved one, there are a lot of financial tasks to be done and decisions to be made, not just what to do with the insurance money. Losing yourself in grief or letting sadness overwhelm you can cloud your judgment or make you forget important things you have to do to keep going, like continuing to pay the mortgage, organizing financial documents and filing for survivor’s benefits.

As far as selling your home or making any big purchases, it’s wise to wait six months to a year, until you’ve had a chance to adjust to life without your loved one, and really think the decision through.

Don’t neglect any timely, important tasks or decisions, but pause if you need to, allow yourself time to grieve and clear your head before you make any big plans, investments or financial changes after the death of a loved one.

 

3. Not Having an Estate Plan

A shocking number of adults – as many as 60 percent – don’t have a will or an estate plan. It’s never too early, or too late, for that matter, to draft your estate plan, and you don’t have to have children or a million bucks to need one.

A good estate plan should include a will or trust to designate how and to whom your assets (property, investments, retirement accounts, etc.) will be distributed. If you die or become incapacitated without having your affairs in order and having clearly expressed your wishes and intents for your assets, your heirs, if you have any, may be subject to long, drawn-out legal probate proceedings. In some cases, the state or local government might even have to get involved. An estate plan should also include designating power of attorney and an executor.

 

4. Following the Wrong Advice/Working with a Bad Advisor

Do your due diligence when considering financial advice or choosing a financial advisor. Not everyone who offers you market insight or insurance recommendations actually has your best interests at heart. And there is no one-size-fits-all financial guidance.

Some bad decisions might financially impact you right away, while others you might not feel for months or even years.

Save yourself the hassle, the time and the money by finding a financial advisor you feel comfortable with who understands your financial needs and goals. Having a trusted advisor in your corner can not only relieve some of the pressure of trying to juggle it all by yourself, but also give you financial confidence in knowing you’re making good financial decisions instead of emotional mistakes.

Retirement Guide - PAX Financial

This material is provided by PAX Financial Group, LLC. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The information herein has been derived from sources believed to be accurate. Please note: Investing involves risk, and past performance is no guarantee of future results. Investments will fluctuate and when redeemed may be worth more or less than when originally invested. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All market indices discussed are unmanaged and are not illustrative of any particular investment. Indices do not incur management fees, costs and expenses, and cannot be invested into directly. All economic and performance data is historical and not indicative of future results.

Darryl Lyons

Darryl Lyons

CEO and co-founder of the PAX Financial Group, Darryl Lyons has been a licensed professional in the financial services industry since 1999. A lifelong Texan, Darryl began his career in the financial sector just one day removed from earning his bachelor’s degree in corporate financial management and accounting at St. Mary’s University. Throughout his career, he has won awards for recruiting and development from Fortune 100 companies. In January 2007, he chose to begin and develop his independent practice. He joined Andres Gutierrez and Joseph Schuetze to form the PAX Financial Group. Darryl also served as the Chairman for Brooks Development Authority. Shortly after his service, Mayor Julian Castro, named a park “The Darryl W Lyons Park” in honor of his service. He was named to the 2010 San Antonio Business Journal’s “40 Under 40 Rising Stars,” which honors people making a difference in business and in the community.