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How to Avoid Blind Spots in your Financial Life

Photo of author, Brian Gongaware, CFP®.
Brian Gongaware, CFP®
Director of Advisory Services and Chief Compliance Officer

Recently while taking a drive in the suburbs of Pittsburgh, I was observing all the things happening around me. There were billboards and street signs to catch my eye, nicely decorated storefronts to enjoy as I passed by, flashing traffic signals to adhere to, construction cones to avoid, and of course, a very busy flow of cars, motorcycles, city buses, and pedestrians to be aware of.

With so many distractions outside our vehicle, not to mention those inside (radio, cell phone, passenger conversations, etc.), it's easy to understand how a simple distraction can morph into something more dangerous —a "blind spot" so to speak—for a driver who has lost his focus and never sees the accident coming.

Just like driving a car, we can also experience blind spots in our everyday lives, especially "financial blind spots." Let's take a look at three of the most common financial blindspots and talk about how best to navigate them using sound decision-making.

#1 Emotions/Moods: There are two emotions that ruin investment returns—fear and greed. Fear can drive otherwise logical decisions to swerve away from something that isn’t there or isn’t as threatening to your safety and well-being as perceived. Greed, or chasing returns, can cause people to take additional risks by driving faster than appropriate for the conditions or ignoring their mirror that reminds them “objects in the mirror are closer than they appear.” A well-defined and disciplined investment strategy should take into consideration these emotional influences.

#2 Savings Rate: Winning the lottery is not a savings or retirement plan. The benefits of a systematic savings plan can be hidden from plain sight. Automating and prioritizing your personal saving/investing can allow you to save less over the years but have a larger amount in the future. Studies have also shown that automating your savings can relieve mental stress. So for instance...

According to the U.S. Bureau of Economic Analysis, the personal savings rate in the United States today is 5.7%. Most financial experts, however, recommend saving at least 10-15% of your income. How do you accomplish that?...

#3 Costs and Fees of Implementation: The financial services industry has long been criticized for disguising fees and the true costs of an investment strategy or program. This lack of transparency can cause investors to be skeptical or uncertain about their ability to work with a professional advisory firm. We strongly urge you to always insist on a clear "view" or understanding of all costs regarding your investment strategy whenever working with an investment management professional. You should also be evaluating the performance of your investments on an after-fee (net) basis. What does that mean?...Otherwise, your financial future may be impacted by these unseen costs.

So remember, the next time you’re behind the wheel along a crowded roadway or even a windy back road, pay attention to the blind spots in your car. And when you’ve safely arrived at your destination, ask yourself, “What am I not seeing in my financial life that could improve my financial future?”

While the above are the three most common financial blind spots, we know there are other blind spots that can hinder us financially if we aren't paying attention: inflation, strategic asset allocation, tactical allocation, asset location, taxes, and clear and accountable reporting. Working together with your trusted financial planning advisor, you should be able to address your unique "financial blind spots" and discuss clear solutions, identify new opportunities for financial growth, and craft a comprehensive "map" or strategy that will help you reach your destination of financial success.

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