Planning your retirement is often full of a mix of emotions. You worked hard to get here and you’re ready to enjoy these years. But without a steady incoming coming in, it’s hard to make financial decisions.
Balancing your immediate needs with plans for long-term goals is important. Along the way, it’s easy to make mistakes that can impact your finances. If you know what to watch for ahead of time, you can stay away from the financial mishaps that often lead those in retirement into problems.
These five common financial mistakes are lessons learned that you don’t have to go through because you’ll know what to avoid!
1. Spending Too Much on a Home
When you’re young and have a family to shelter, you might want the two-story, white picket fence dream home. But as a newly retired individual or couple, that’s just too much house to take care of.
If most of your home is shut off and unused, it might be time to consider downsizing. This is particularly true if you’re still paying on the mortgage. Chances are, you have enough equity in the home to sell it and buy something smaller without financing.
Senior living communities are popular in many areas since they offer the independence of living on your own combined with having all your necessities close by.
Your mortgage or rent should not be more than 30% of your gross monthly income. If it is, it’s time to think about refinancing, selling, or downsizing.
2. Hoarding Your Cash
The economy is confusing, and it’s understandable that you want to protect your assets by storing your cash. Even if you are hedging your bets and using bank accounts and money market mutual funds, your money won’t grow.
To ensure what you have will last, you have to prepare for inflation, which means you need to continue to grow your cash investments. If not, unexpected health care expenses and the cost of living increases will eat away at your stockpile.
3. Investing Too Much in Too Many Places
On the other side of not investing enough is the problem of investing too widely. A diverse portfolio of investments is a smart idea, as long as it’s not too diverse. It’s better to invest deeply in a few different areas than to put a little bit everywhere.
Take some time to talk to a trusted financial advisor and learn your own risk safety preferences. Once you know what you’re comfortable risking, you can focus on investments that match your level.
4. Fearing Change
If there’s anything the past two decades have taught humanity, it’s that change is inevitable. But when you’re facing retirement, you need to know what is stable and what to keep flexible about.
Fear of change makes some retirees make financial mistakes that perpetuate the cycle of lack they were trying to prevent.
There will always be new financial investments you can make that could be beneficial. There will always be scammers trying to take your hard-earned money.
Instead of fearing change, find a trusted financial advisor that can guide you in your money decisions throughout your retirement.
5. Thinking “Retirement” Means Not Working
Just because you’re retired doesn’t mean you can’t keep making an income somehow. You don’t have to if you’re financially set. If money worries are keeping you from enjoying your Golden Years, though, why not consider a side business or a part-time job?
Not only will this extra income relieve some of your stress, but it gives you something to do to make you feel valuable and needed. If your job starts becoming a source of anxiety instead of enjoyment, you can quit on your terms, because you’re retired!
Preparing for retirement requires taking a good, long look at your finances to make sure they’re going to last you for, hopefully, the next few decades. Rising costs of living and the healthcare expenses that come with getting older are factors you have to be cognizant of in your planning.
Avoiding these five common financial mistakes can help you enjoy your retirement and increase your quality of living!