Money matters are some of the most complicated but most important aspects of building a secure future for ourselves and our families. However, there are a number of common errors that can cause difficulties for any household. In fact, Consumer Reports recently released an article detailing the 7 most common financial mistakes that each of us should strive to avoid.
The article details a story that we’ve heard far too often in our profession – a loved one passes away without updating his/her beneficiary designations on a trust, will, life insurance or retirement plan. In this case, Karen Mendelsohn’s husband, Harold, passed away from a heart attack at merely 40 years of age. Karen found herself a widow at 36 years old, now facing the prospect of raising her 4 and 7 year olds as a single mother. Due to an oversight, her husband had failed to update the beneficiary designation on his retirement plan. In fact, he still had his parents listed as beneficiaries and they claimed the $100,000.
Karen was forced to go through a law suit in order to receive the funds from her in-laws for the support of her children. Thankfully, the court was able to make the right choice and reward the funds to Karen. This situation goes to show how something so small and simple can have such huge potential consequences. Harold most likely would have wanted his retirement to go to his wife and children to ensure they were provided for after his death. However, by not updating his beneficiaries on his retirement plan he could have prevented them from having the funds to provide for their needs.
This situation is, unfortunately, more common than many people realize. There are several documents that should be regularly updated and reviewed in order to ensure that your wishes and needs are being met – which is why it is number one on the list!
Here are the seven most common financial mistakes that most people make:
- Not updating wills and beneficiaries. As we’ve seen in the story above, it is vital to regularly check your planning documents and update as needed. We recommend checking your designations every year and having your estate plan reviewed every 3-5 years, or when a life or tax change comes along.
- Not sharing information with family. Honesty is the best policy. A family that is well informed is more likely to appreciate the steps you have taken to plan on their behalf. This also helps to avoid potential conflict, hurt feelings and anger over misunderstandings.
- Not getting the most out of your 401(k). Make sure that you take advantage of the maximum matching that your company may provide for your 401(k). Also, review your plan regularly to ensure you are getting the most out of your investments.
- Underinsuring. Make sure that you have the appropriate amount of insurance to cover potential damage to your property and valuables. If you are a business owner, make certain you have sufficient insurance to cover liability lawsuits.
- Not planning for emergencies. We never know what storms will come in our life or when they will strike. It is important to build a financial supply that will last you at least three-six months in case of injury or unemployment. Many may also choose to build a food storage to help in times of hardship.
- Not checking credit reports. Credit report checks are free and will help you ensure that you are maintaining a high credit score. The higher your credit score, the better options you will have for financing purchases such as property or a vehicle.
- Mismanaging debt. The vast majority of Americans have a large amount of consumer debt. Interest never sleeps nor takes a holiday, it accrues constantly and can be the most costly financial mishap that you can make. Pay off your debt and start building your savings as soon as possible.
The Consumer Reports article goes into great depth on each of these topics, and we recommend taking the time to read it and understand the suggestions. Think about your current situation and the steps you can take to get your affairs in order and to provide a brighter future for yourself and your loved ones.
For questions or to schedule your free estate planning consultation, contact our office today at 888.222.1328.
What the Attorneys of Morris Hall Can Do For You:
The attorneys at Morris Hall have 100’s of years of combined experience ensuring that families’ assets are protected from probate, unnecessary taxes, creditors, ex-spouses and Medicaid spend-down. The attorneys also help those in Arizona to apply for and receive Medicaid assistance and Veterans Benefits. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Cave Creek, Tucson, Prescott, Flagstaff and Arrowhead. Contact us today at 888.222.1328 to schedule an appointment!
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.