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12 investment mistakes couples make
By Daniel | July 21, 2008
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Everyone has a different view about money and various ways of handling it. Two people working for a common goal can have an advantage, but working together with money is not always as simple as it appears. Dana Dratch at Bankrate.com recently wrote: 12 investment mistakes couples make. This list points out critical mistakes to avoid and the importance of each one. I found there are many of these that can apply to individuals as well. |
1. Too many accounts:
Having money in too many accounts can be time consuming and a hassle to manage. If one of you does the majority of the financial planning, your spouse may be left in the dark if something were to happen. Sitting down with your partner and creating a list of accounts will put you on the same page.
2. One spouse deals with advisors
It’s your money too. Both partners need to know where and what their money is doing. A financial advisor should have a good relationship with the both of you to effectively manage your money.
3. Not putting enough aside
Start early and save at least 10% of your take home pay. You should save money from both paychecks and don’t settle for the minimum. As a couple you should have shared expenses and the extra money should go straight to savings.
4. Too much money tied up in cash
Long term goals should have an investment plan set up. Keeping your money in cash will not keep up with inflation and your money will be worth less and less.
5. One party isn’t getting a voice
Each partner has their own risk tolerance and when there is only one person doing the investing, the investment fits their comfort level. Investing in separate accounts will allow each of your own level of risk tolerance as a compromise.
6. Failing to diversify those investments
A key factor in investing is diversification. You will need to have high risk and low risk, domestic and international as well as a variety of industries.
7. No shared goals
A set of common goals will make saving and investing easier. Sitting down and writing them out on paper will create a stronger plan. Short term and long term goals should be in progress at all times.
8. Skipping account maintenance
Failure to re-balance your investment to maintain the correct asset allocation will hurt your financial plan. Forgetting to update personal information and beneficiaries can spell trouble if something happens to one of you.
9. Commingling inherited assets
Once this money is placed in a joint account, it is considered marital property and you may lose it before you ever use it.
10. Investing without understanding
This can hurt you in two ways. One, it may not work the way you thought it did, and second, you may have problems getting out of it. You wouldn’t own a car if you didn’t know how or want to know how it works.
11. Don’t know how advisor earns money
Learning how they are paid will tell you if they have your best interest in mind. You don’t want biased information when it comes to investment advice. You hire them to work for you.
12. Not collecting ‘free money’ at work
Not taking advantage of an employer matched 401k is like someone offering you free money and telling them, “No thanks.” The 401k match is part of your compensation included in benefits. Increase it slowly to get started and pretty soon you won’t feel a difference.
Topics: Personal Finances |