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Six Financial Blind Spots to Avoid in 2021

January 12, 2021
By: Kelly Welch, CFP®, Vice President and Wealth Advisor, Girard Advisory Services, LLC

Man and woman embracing on beach.The start of each year provides a great opportunity to set new goals. Given the hardships of 2020, many people experienced financial setbacks which makes it even more important to review where you have been and to look forward and create objectives that can help tee you up for financial success.

As you determine your goals for 2021, beware of these six common financial blind spots:

  1. Generational differences. Your age can impact your approach to money management and financial habits. For those who grew up during the Great Depression, they tend to prioritize saving, being frugal and even hoard cash. Money management for Gen X is impacted by being the “Sandwich Generation” which speaks to the fact that many in Gen X are financially supporting aging parents and their adult children. And then there are millennials who value experiences over material possessions. They tend to have an increased trust in advisors, but also have their own stressors like burdensome student debt. Every generation has unique elements that impact their financial behaviors and approach towards planning. Understanding how generational factors influence money habits can help you take an objective look at your own approach to money management and help take steps towards achieving your goals.
     
  2. Short-term goals. A strong financial plan is not just about the end game – meaning how you’ll fare in retirement. Establishing objectives for a successful retirement is critical, but it’s just as important to consider short-term objectives, essentially creating a balance. Identify what you want to save for over the next three, five and ten years (car, house, children for example), but also look to the next 12 months – do you have a wedding to attend or want to take a vacation? Identifying both short- and long-term goals lets you place value on what you are putting your money toward and can help keep you on track.
     
  3. Debt. We’re conditioned to believe that all debt is bad, but at times, taking on debt allows you to use other people’s money to your advantage. Right now, with interest rates so low, and likely low for the foreseeable future, it’s a promising time to buy a home or think about refinancing existing debt. People want to be debt-free, which is a great goal (do not get me wrong!), but not all debt is necessarily bad for the long-term especially if the decision to take on a loan, for example, works in your favor from a financial standpoint. Working with a financial advisor can help take an objective look at your goals and how debt fits into your unique situation.
     
  4. Emotions. Individuals need to think about financial planning like running a business and leave emotions at the door. But it’s hard to not be emotional with money – it’s easy to panic when you see the market take a nosedive and your portfolio loses funds earmarked for your future – but the quicker you can make a plan, become disciplined in that plan and stick to it, the better off you are likely to be. Avoid making money decisions in an emotional state (good or bad). Often, making investing decisions based on emotions in the short-term will only hinder long-term potential. Working with a financial advisor can help you create an investment strategy that matches your time horizon and risk tolerance and help you stick with that plan even while navigating emotionally charged events.
     
  5. History. Be aware of the fluctuations of the market. Know the market will go up over the long-term, and it also goes down. It’s the natural cycle. As an investor, you must have realistic expectations. Understand that it’s not bliss all the time and that there will be tough moments. No one wants to see the Dow go down 500 points, but, while I cannot guarantee it, history has shown that it shouldn’t stay down forever. Remember, for long-term portfolio objectives, one bad month doesn’t make a year and a bad year doesn’t make a lifetime. The stock market is cyclical and will always go through disruptive periods. Don’t throw away years of planning because of an uncomfortable month or two.
     
  6. Rebalancing. Many investors “set it and forget it.” However, this leads to missed opportunities to rebalance. It’s important to look at a portfolio at least annually. This allows you to sell or trim things that have done well, and buy weakness – following the adage of sell high, buy low. Having a financial plan in place and reviewing it on a regular basis can potentially give you confidence to make bolder decisions that could pay off in the long-term.


As we slowly come out of the pandemic, 2021 will be a significant year for individuals seeking to rebuild their finances if they veered off track. Now is a great time to reach out to a Girard advisor who can help establish or strengthen your financial plan and guide you on the path to financial freedom. 

 

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This article is for general information purposes only and is not intended to provide legal, tax, accounting or financial advice. The information in this article, and any opinions expressed therein, do not constitute a recommendation or an offer to buy or sell any security or financial instrument. Viewers should consult with their financial and/or legal professionals before making any financial decisions.