I am not shy about sharing my big investing mistakes because I want others to learn from my mistakes.
Investing decisions made on my behalf by a certified financial planner cost me at least $80,000 in fees and a bad financial product.
I don’t want that to happen to anyone.
That money lost doesn’t include what that $80,000 would’ve grown to over the next 30 years (I don’t even want to think about how much money I left on the table.)
The most annoying part about the investing mistakes I made? Completely avoidable.
Most investing mistakes are completely avoidable with an education.
Here are the most common investing mistakes I see 30 and 40 somethings make:
1. Not Knowing How Much you Need to Retire.
Most people have no idea how much $$ they will actually need in retirement.
One rule of thumb is to have enough invested so that you can live off 4% of those investments. This is called the 4% rule.
This is a good ballpark estimate, not a perfect strategy so be sure to understand your needs on a yearly basis and plan for the worst.
2. Not Investing Because You’re Not Living Below Your Means.
If you aren’t on track to hit your retirement goals, this is when you really need to buckle down and make sure you aren’t spending money you don’t have.
Create an emergency fund with enough money to cover your non-negotiable living expenses for at least 3 to 6 months and make sure you understand how money is coming in and out of your life with a budget.
If you don’t know what your personal cash flow looks like, you’ll never be able to figure out how much you can be investing to truly grow your wealth.
3. Not Earning As Much As You Can and Should Be.
If you can make and invest more in your 30’s, your money will have more years to be invested and to benefit from compound interest.
It’s worth learning how to negotiate your salary, leveling up your skills, or starting a side hustle to make sure you are earning what you are worth during this time.
4. Investing Too Conservatively or Not At All
If you’re not investing at all, you’re running out of time to take advantage of time in the market. It’s not impossible, but it gets harder every year you wait.
If you’re investing too much in bonds or bank account savings, it’s not going to help you grow your wealth in the long run. If you have 20 or 30 years ahead of you, you might want to considering investing mostly in stock based index funds.
5. Not Talking Money With Your Partner
You need to talk about money with your person regularly, not just one time in the beginning of your relationship. If you are not on the same page financially it can impact your relationship and your finances. If you just started dating, pay attention to your partner’s money habits.
6. Trying to Time the Stock Market
No one knows what the stock market will do next.
Most of the time, major financial institutions can’t agree on what’s up and coming for the economy or the stock market.
Investing consistently over a long period of time is the best way to grow your money, knowing that it’s impossible to know what will happen next.
7. Opening a Roth IRA but Forgetting to Select Investments
Your Roth IRA is a container for your investments, not an investment in and of itself. You have to make sure you have actually selected investments (like index funds) or you are just parking your money in a glorified savings account.
This is a super sad mistake I see people make all the time. If you don’t invest your money you are missing out on compound interest. I recently I had a client who had $20,000 sitting in a Roth IRA. If that money would have been invested, it would be worth over $80,000 today, assuming the historical average return of the stock market at 10%.
Ready to Take Control of Your Finances?
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