5 Key Elements Many DIY Financial Planners Often Overlook

In the age of the Internet, many people have become DIYers. Everywhere you look, you can find inspiration and know-how. 

Simply do a quick online search, and you’ll find videos, blogs and entire websites that will walk you through how to fix your leaky sink, teach you how to change your car’s oil by yourself, even show you how to grow your own food. There are stores and television networks devoted to helping you do it on your own (whatever it is). There are “experts” on the radio, on podcasts and in your social media feed. In fact, it seems there’s not much you can’t DIY these days.

But what about financial planning?

Well, like just about everything else, you could be your own financial advisor. You could also install a new HVAC system or rebuild your transmission, but that doesn’t mean you necessarily should. 

Why not DIY when it comes to financial planning?

For one, when it comes to something as important as your financial future, there’s a lot at risk. A seemingly simple mistake can have a big impact. There’s no do-over.  

Secondly, financial planning can be complex, and when you attempt to tackle it alone, it can be easy to overlook important elements or make small mistakes that can have big effects. 

As a multi-generational firm, Foran Financial Group has worked with parents, their children, and even their children. In this experience, regardless of where you are in your financial planning journey, there are 5 common financial planning aspects many DIYers often overlook.

 

Contact the team at Foran Financial Group to see how we can help.

 

Taxes

Even if you’ve read up on current tax laws, taxes are an area that is often overlooked. Why? They change. 

Not planning for taxes can be detrimental in many ways. 

  • You could fail to calculate and pay your fair share in taxes, resulting in audits, big fees and penalties. 
  • You could miss out on exemptions, tax savings and other advantages you may be eligible for.
  • You could be missing out on saving opportunities.

Incorporating tax planning into your financial plan can benefit you today, tomorrow and even when you’re gone through your estate. 

Specific State Rules/Laws 

Speaking of taxes, income tax laws are one aspect of financial planning that can be different in each state. Estate planning laws and inheritance taxes can also vary from state to state. If you work in one state and live in another, or if you have moved, plan to move, or have heirs in another state, you may not be aware of important rules and regulations that can have a big impact on your finances. 

Read our recent blog post: New Jersey Named One of the Places Where Retirement Planning is Most Important

Risk Tolerance

As a NJ investment advisor, one of the most common mistakes we see DIY financial planners make, especially younger investors, is taking on too much risk, or not taking enough risk, which can result in leaving money on the table by not realizing potential gains. 

When determining your risk tolerance, make sure to consider a number of factors, including your short- and long-term savings goals, your age and your investment time horizon. 

Accurate Projections 

To work toward and ultimately reach your financial goals, such as maintaining your current lifestyle in retirement, it’s important to establish how much you’ll need, but it’s also key to know what your future expenses are likely to be.

Online calculators can be very helpful, but keep in mind that they are meant as general tools, and they may not always give you the most accurate numbers.

Talk with a financial advisor about your specific situation to determine more appropriate projections. 

Rules of Thumb 

Rules of thumb are another helpful tool many DIY financial planners use, but the problem is, they don’t work for everyone! Rules of thumb are based on averages, so ask yourself, is your situation average? The more complex our financial lives are, the more we fall outside of the “average” scenario.

For example, a common rule of thumb states that you should save 20 percent of your income for retirement. The reason this doesn’t have universal appeal is that in many cases, some of that 20 percent could be better spent in other ways, like paying off high-interest debt or building an emergency fund.

Talk to a financial advisor about whether a specific rule of thumb applies to you. 

The Bottom Line

There are many important aspects of financial planning; many that you can easily forget or overlook. Financial mistakes or omissions aren’t always realized right away. The effects of some decisions may not be discovered for years. 

You may have Social Security questions: 

Does New Jersey tax Social Security benefits? 

How much will my monthly checks be?

Do I qualify for spousal benefits?

 

You may have questions about your particular financial goals: 

How much money should I save for college?

How much should I have in my emergency fund?

Should I pay off my mortgage before I retire?

 

You may have questions based on where you live: 

Will my retirement income be taxed?

Will my heirs have to pay taxes on their inheritances? 

What happens to my retirement income if I relocate? 

 

Remember, success doesn’t automatically translate into long-term financial security. It takes intensive financial planning and regular reviews to make sure you take the right actions and make the right decisions, consistently. 

Financial planning can be complicated, but you don’t have to do it on your own. At Foran Financial Group, we can help. Schedule a no-obligation conversation and start the discussion. 

 

 

Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC.

The financial professionals associated with Foran Financial Group may discuss and/or transact business only with residents of the states in which they are properly registered or licensed. No offers may be made or accepted from any resident of any other state.

This information is not intended to be a substitute for specific individualized tax or legal advice. We suggest that you discuss your specific situation with a qualified tax or legal advisor. Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion, withdrawal limitations from a Roth IRA, and income limitations for future contributions to a Roth IRA. In addition, if you are required to take a Required Minimum Distribution (RMD) in the year you convert, you must do so before converting to a Roth IRA.