Are you sabotaging your financial success, and thus putting your mental health at risk? According to the Financial Health Network, money troubles are a major factor in many Americans’ rising stress levels.
One important thing to remember: You are in control of your finances, and your financial health largely comes down to how you handle your money and approach your investments. Consider these four factors that could derail your financial health and discover ways to counter them, and thus lower your anxiety.
1. Timing the Market vs. Time In the Market
It’s tempting to sell stocks when the going gets tough. When the headlines feel fast, furious, and frustrating, turn off the news and go for a walk!
Many investors feel the need to take action, but after speaking with their advisor they often find that action is unnecessary if they have the right investment mix. Leave the day-to-day decisions to your financial advisor—after all, it’s their job to take the emotion out of portfolio decision-making and keep you on track.
Time in the market beats timing the market every time. Read our previous article to learn more about how missing out on the best days in the market can cost you anywhere from 4.2% to over 13%. Market volatility can test all of us, so meet with your advisor to discuss an asset allocation mix you won’t lose sleep over.
2. Investing Too Conservatively or Too Aggressively
Not having the right asset allocation mix can be detrimental. If you’re too conservative, you risk not growing your assets enough to live on in retirement. If you’re too aggressive, you could be tempted to sell when you should simply stay the course.
Consult your financial advisor to get the right mix of stocks and bonds for your situation. It’s important to remember that growth is needed to overcome inflation and to meet your withdrawal needs after you retire. You could be retired for 30 years!
3. Being a Spender & Not a Saver
The IRS implemented catch-up contributions to 401(k)s and IRAs in 2001 because, unfortunately, Americans hadn’t been saving enough—and still don’t, according to a 2024 AARP survey.
While these catch-up contributions are a start, they certainly don’t make up for investing early on in the market. Be sure to take full advantage of the annual contribution limits. If you have more to save after you’ve built an emergency fund, paid your bills, and maxed out retirement accounts, it’s time to invest in non-retirement accounts. Additional investments can provide income and tax diversification in retirement.
Are you tracking your income and spending? You should! It’s a straightforward bookkeeping task that anyone can perform and is a fundamental principle of successful money management. Use technology—like Quicken, Monarch Money, or Rocket Money—to help you with the task. You may find some unexpected expenses that can lead to easy, and financially rewarding, adjustments.
Additionally, spending and savings habits are often passed on between generations. Teach your children and grandchildren to save early and often to avoid the stress of catching up later in life. The NY Times bestseller The Millionaire Next Door, by Thomas J. Stanley and William D. Danko, is a great resource for living within, or even below, your means. Remember: Warren Buffet is just as famous for not having flashy cars and homes as he is for being a good stock picker.
4. Not Having a Financial Plan
It’s never too early to start planning, no matter your goal. Waiting until the kids are in high school to save for college or waiting until you are 55 to consult a financial advisor is too late.
Having a customized plan early in life will ensure you maximize your savings and take advantage of tax breaks at every step. Your advisor can help you adjust and stay on track when life changes. Regular checkpoints with your advisor and sticking to your plan can mean the difference between living the retirement life you dream of or having to watch every penny—and no one wants that stress. Retirement should be a joyful, happy time.
Take a Breath Before Acting
Feeling the stress of a tough, uncertain market is understandable, but it’s best to take a beat before making any impulsive decisions regarding your finances. So, if you need to level-set, reach out to your financial advisor for perspective and guidance through challenging times.
Are you searching for a financial advisor who has navigated both the ups and downs? Contact Carlson Investments to get to know our experienced, understanding team and to learn how we can help.
Carlson Investments does not provide tax, legal, or accounting advice. This content has been written for informational purposes only. Always consult your individual tax, legal, or financial professionals for advice tailored to your situation.
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