It’s hard to believe that we’ve been writing these articles for a year now! When we first
started, we were worried that we’d have difficulty writing an article every week. We
quickly found out that it actually gets easier as time goes on. We thought it would be
worthwhile now to take a few minutes to reflect on what we’ve written to date. Below is a
summary of what we believe to be some of the most important do’s and don’ts that you
should consider to better manage your finances. (Note: Some of the articles that
discussed these issues are still available on the Oakland Insider web site. If not
available there, all of our articles can be viewed on our website ---see the link below. We’
ve noted the article titles and dates with each do and don’t)
- Do make a concerted effort to manage your money. You’ve spent the majority of
your life working to accumulate money. It’s important to learn how to manage your
money yourself and/or get professional help. Make sure you are getting good advice.
(The Biggest Money Mistake You Can Make, June 16, 2008 and Are You Getting the
Best Advice?, August 5, 2007)
- Don’t make basic financial mistakes such as:
(1) not establishing an emergency fund. Everyone should have at least three to six
month’s of fixed and variable expenses in a cash-equivalent account that earns a
competitive interest rate.
(2) running up credit card debt. Pay off all credit card balances each month. If you can’
t eliminate your credit card debt, you’re obviously spending more than you’re making.
Review your budget and eliminate all discretionary expenses.
(3) not having adequate insurance coverage. Make sure you have adequate auto,
homeowner’s, medical, life and disability insurance. Consider long-term care insurance
and an umbrella liability policy. (Fix These Basic Money Mistakes Fast, December 9,
2007)
- Do diversify your portfolio
True diversification requires owning 8-10 broad asset classes that provide uncorrelated
returns. Owning several mutual funds that have similar holdings provides little
diversification. True diversification can increase returns while at the same time, lowering
risk. (Believe It, Diversification Really Does Work, June 1, 2008)
- Don’t ignore investment expenses
Many investors have no idea what they are paying, either directly or indirectly, for the
management of their investments. Mutual fund management fees, advisory fees,
transaction costs and taxes cane significantly eat away at portfolio returns. Make a
concerted effort to understand what you’re paying and reduce it to the absolute
minimum. (Investment Expenses Can Take Big Bites, March 23, 2008)
- Do take time to plan for retirement
A successful retirement requires adequate savings as well as psychological
preparation. Will your money last through your life expectancy? What will you do in
retirement? How will your self-worth be impacted? Careful planning can make a world
of difference. (Are You Psychologically Prepared for Retirement?, June 8,2008,
Rethinking Retirement, September 9, 2007, Retiring Before Age 59 and ½, December 2,
2007)
- Don’t ignore basic estate planning
Don’t let an unexpected death leave you or your survivors scrambling to put their
financial life back together. Make sure your financial records are in order and take the
time have the basic estate planning documents prepared. (Everyone Needs an Estate
Plan, Parts I & II, January 20 and February 3, 2008)
- Don’t rush into buying an annuity
While everyone is worried about their money lasting through retirement, annuities can
be complex products and often carry hefty fees. Annuity sales personnel make big
commissions off of annuity sales. Some types of annuities can be appropriate for
retirees. Nevertheless, you need to educate yourself about all aspects of annuities
before making a purchase. We recommend you seek the unbiased advice of a financial
professional who is not in the business of selling annuities. (All About Annuities Parts I,II
and III, March 2, March 9 and March 16, 2008)
David C. Patterson, CFP® and Erin Patterson-Preston, CFP® are the owners of
Patterson Advisors, LLC, a fee-for-service-only financial advisory firm. Patterson
Advisors, LLC is a Registered Investment Advisor, registered with the State of Michigan,
helping clients in Waterford, Clarkston and Royal Oak, Michigan as well as other
Oakland County, Michigan communities . Visit www.pattersonadvisorsllc.com for more
information or call 248-674-2108.
Published in the Oakland Insider, August, 2008, renamed:"Celebrating a Year With a
Summary of Important Do's and Don'ts"
A Summary of Our Most Important Do's and Don'ts
By David Patterson and Erin Preston (formerly Patterson)