By Bill Taber
Money management is an essential part of our lives, yet many of us struggle to make the right financial decisions. It’s easy to fall into the trap of overspending, impulse buying, and not saving enough. As a seasoned financial advisor, I’ve had the opportunity to interact with hundreds of clients regarding their finances, and through my observations, I have noticed several recurring mistakes people tend to make.
In this article, I share the top three money mistakes I have seen so you can best understand how to avoid them. Whether you’re just starting to manage your finances or looking to improve your current situation, I hope these key insights help you make better financial decisions.
1. Failure to Have a Comprehensive Estate Plan
There’s a common assumption that estate planning is only for the wealthy, but the truth is that everyone needs a plan. An estate plan is a set of legal documents that outlines how your assets will be distributed after you pass away. It also includes instructions for healthcare decisions in case of incapacity, naming guardians for minor children, and reducing taxes.
Without an estate plan, the distribution of your assets can be left to the laws of intestacy, which may not align with your wishes. This can lead to disputes between family members, delays in asset distribution, and additional costs. Also, if you become incapacitated without an estate plan, your loved ones may not have legal authority to make important healthcare decisions on your behalf. By taking the time to create an estate plan, you will safeguard not only yourself, but your loved ones and your assets.
2. Not Planning for Long-Term Care Costs
Long-term care costs, including in-home care, assisted living facilities, and nursing homes, can add up quickly and deplete your savings. Many people assume that Medicare or their health insurance will cover these costs, but that is not always the case. Medicare only covers limited long-term care costs, and health insurance typically does not cover long-term care expenses.
Current statistics project that the number of people using paid long-term care services in any setting (at home, residential care such as assisted living, or skilled nursing facilities) will likely reach 27 million people by 2050. In fact, the national average costs for long-term care in the United States comes in at a whopping $306/day, or $9,305/month, for a private room in a nursing home. With a price tag that high, it is imperative that you weigh your options for buying long-term care insurance, because if you decide you want it, the best time to buy is between ages 50 and 60. After age 65, the cost goes up.
By not planning for long-term care costs, you may end up relying only upon your savings, which may not be sufficient to cover your expenses. This can result in having to sell assets, take on debt, or burden your family members with the costs. This is only one reason why it’s essential to have a plan in place to cover potential future costs. Your plan might include purchasing long-term care insurance or setting aside funds in a separate account specifically for long-term care expenses.
3. Not Planning for Unexpected Risks
Life is unpredictable, which means unexpected events such as job loss, medical emergencies, or natural disasters can have a significant impact on your finances if you’re unprepared. If you fail to consider these potential hardships, you may be left vulnerable to future financial stress.
By not planning for these unexpected risks, people often end up relying on high-interest loans, credit cards, or depleting their savings, which can result in the accumulation of debt, late payments, and damage to their credit scores. This is one more reason why having an emergency fund set aside for these situations is so critical. A general rule of thumb is to have six to eight months’ worth of living expenses saved, which can provide a cushion while easing the burden of unexpected expenses.
In addition to having an emergency fund, you also may consider other types of insurance coverage to hedge against these risks. These may include health insurance, disability insurance, and homeowners insurance. By having the appropriate coverage in place, you can protect yourself from these potential financial losses. It’s better to be prepared than to face financial challenges that could have been avoided with proper planning.
Partner With a Trusted Professional
While not every mistake is avoidable, it’s encouraging to know that with the right tools and guidance, you can control more than you think. At TABER Asset Management, we work to help you mitigate these costly mistakes in order to shield you and your loved ones from financial hardships. We strive to set you up for success by building out a comprehensive estate plan and strategy for long-term care costs, while preparing for any unexpected risks. To get started, reach out by scheduling a 15-minute intro phone call online or calling us at 515-557-1860 or firstname.lastname@example.org. It’s never too late to take control of your finances, and even small changes can make a big impact over time.
Bill Taber is President and Founder of TABER Asset Management, an independent, fiduciary wealth management firm that strives to do one thing well: manage their clients’ money by creating wealth, building wealth, growing income, and preserving capital so they can experience financial freedom. With more than four decades of experience, Bill is dedicated to building relationships with his clients and their families and walking alongside them as they navigate financial decisions. His favorite days are the ones when he gets to witness the joy and relief on his clients’ faces when they realize they can pursue their dreams and live their ideal lifestyles. Bill is known for going the extra mile, getting things done with integrity, and working with a stewardship mentality.
Bill graduated from the University of Iowa with a bachelor’s degree in business administration and fell in love with the profession when he got to help one of his first clients—his father—turn his lifetime of hard work into a dream retirement. He got his start in the industry as a corporate services representative for Bankers Trust Company and spent decades working as Assistant Vice President of E.F. Hutton & Co. and First Vice President of Principal Financial Securities. He is also a graduate of the E-Myth Worldwide Mastery Business Development Program and is Series 65 registered.
In his spare time, Bill enjoys giving back to his community and served 11 years as a member of the Board of Trustees of Broadlawns Medical Center and 14 years as a Community Representative to their Board Finance Committee. He is also one of the founding members of the Greater Des Moines Connections Mentoring Program. When he’s not working, you can often find Bill spending time with his family and participating in one of his many hobbies, which include traveling to national parks, presidential libraries, and foreign countries; gardening; reading non-fiction; and practicing yoga, Pilates, and meditation. He also loves the simple joys of listening to music, going for walks or bike rides, and watching James Bond 007 films and any movie starring his favorite actress, Meryl Streep. To learn more about Bill, connect with him on LinkedIn.