The Cost of Making Financial Mistakes

By Jacqueline Painter

When it comes to our physical health, many of us regularly visit with and get advice from doctors, nurse practitioners, and pharmacists. And when we have concerns about doctor-check-uprelationship issues, we often talk with our pastors, professional counselors and therapists. We know we don’t always have the answers we need, so it makes sense that we seek out the wise counsel of experienced professionals.

But when it comes to our financial decisions, a lot of us avoid thinking about it or try to do it alone, instead of asking for help—and that can be costly.

According to a 2012 report by the Consumer Federation of America, two-thirds of middle-class Americans said they had made at least one “really bad financial decision”, and nearly half acknowledged that they had made more than one bad financial decision. Eleven percent of these people said these bad decisions had cost them at least $50,000, and 2 percent said their losses had been $200,000 or more.

It’s difficult for us to be able to view our money and other financial decisions from every thinkingangle to see if we’re making good decisions or about to make a costly mistake. One reason likely is because talking and thinking about money can be emotional. Those emotions can get in the way of making good financial decisions. On top of that, determining your financial goals—much less accomplishing them—is hard work, especially when you’re not sure what decisions to make or don’t have someone to help keep you accountable.

Responsibly handling your financial resources is a multi-faceted journey, and one that can be complicated to walk through by yourself. Working with a qualified financial planner to develop a well-constructed financial plan can help you gain control of your finances, and get a clearer understanding of your short and long-term goals.

In general, a wide-ranging financial plan encompasses your entire financial life, including:

  • Cash flow Does it ever feel like your money is controlling you, instead of the other way around? If so, then you might need to take a closer look at your cash flow.
  • Protection planning. What would happen if a fire were to destroy your home? padlockWhat would your family do if they lost their primary source of income because of a death or disability? Obviously, there’s no way to know what will happen in the weeks, months, or years to But you can take steps now to have resources in place for your family and loved ones in case the unexpected happens.
  • Tax All of us are affected by taxes. And whether your finances are fairly simple or really complicated, our tax system can be pretty confusing. Because nearly every financial decision you make can have tax consequences, it’s important to understand how your taxes work and know what you can do to impact your tax situation.
  • Investment From retirement income to college funding, there are a number of reasons why we invest our money. But in order to have that money for our future needs, it’s important to think strategically about the way we are investing. This includes understanding your goals, objectives and risk tolerance, and then finding investments that match your needs and values.
  • Retirement planning. The biggest fear that many people have about retirement is running out of money, which is why you can never begin too early when it comes to retirement The sooner you start, the more time you have to determine how much you will likely need in retirement and how you might get there.
  • Estate Effective estate planning gives you the ability to direct your assets and plans in the event of your death. It also helps you make clear who should be the custodial and financial guardian of your children or other dependents, should you die unexpectedly. Without an estate plan in place, state laws and/or local court decisions will prevail, and they may not be what you wish to happen.
  • Charitable Being generous is an important way to live out your faith and values. give-moneyDeveloping a plan for your financial affairs will help give you the freedom to be more generous, so you can make an impact on the missions and ministries closest to your heart.

The end result is a complete financial plan that gives you the big picture of your current financial health and helps you get on the right path for the future. Planning for your financial life may be one of the best gifts you ever give to yourself and those you care about. It’s a way for you to gain control of your finances and avoid some potentially costly mistakes down the road.

JJacqueline_Painter_2017acqueline Painter is an Everence Financial Advisor at 841 Mount Clinton Pike, Suite A, Harrisonburg, Virginia 22802. Securities offered through ProEquities Inc., a registered broker­ dealer, member FINRA and SIPC. Advisory Services offered through Everence Trust Company, a Registered Investment Advisor. Investments and other products are not NCUA or otherwise federally insured, may involve loss of principal and have no credit union guarantee. Everence entities are independent from ProEquities Inc.

Image credits: pixabay.com

What is your money, debt management, and generosity type?

During February the COMPASS blog is sharing some Faithful Fun with Finances. Today, we welcome back regular contributor Beryl Jantzi to the blog who shares about and asks, “What is your money, debt management, and generosity type?”

It’s been suggested that Americans fall into one of four groups when it comes to how we manage money. Maybe as you review these four models you can identify your own and decide what changes if any may be helpful moving forward.  Here’s what they are:

The Perfectionists: 19% of Americans

These consumers know the exact route to their financial goals, whether they developed the map themselves or sought a professional financial planner. Not only do they have a household budget, which includes retirement savings and insurance, but they work toward specific short and long term savings goals.

The Dreamers: 38% of Americans

Most consumers fall in this category. They have some goals worked out and have an idea of what they’d like to achieve. Dreamers may have savings plans for retirement or education, but they haven’t pulled everything together to form an overarching plan.

The Procrastinators: 33% of Americans

These consumers put forth the bare minimum and might get to the rest of planning later. Most in this group have a budget or plan to address savings goals, but not both. Their comprehensive financial planning behaviors don’t differ much from wanderers, but some Procrastinators keep a written budget, and they tend to avoid racking up credit card debt.

The Wanderers: 10% of Americans

In this group, people float from bill to bill without any intentional plan. They tend to live in the moment without much concern for the future. They may have debt but probably couldn’t tell you the total debt they have.

How do you manage your money?

How do you manage your money?

Knowing our predisposition for managing money is a good start to knowing what we may need to do to get to the next step.  Most of us will need to move one step at a time father than leap from a Wanderer to a Perfectionist.

Questions to ponder:

  • Where do you see yourself most closely identified by the descriptions stated above?
  • If you don’t like the label used to identify your style what different word would you use?

Your generosity will be most fruitful when you have a clear understanding about how God is calling you to share what has been entrusted to you.

Are you a generous wanderer? Is your generosity usually based on the whim of the moment?

Are you a generous procrastinator? Do you have good intentions about giving, but never get around to it?

Are you a generous dreamer? You give, but you could be more disciplined and focused with your giving?

Are you a generous perfectionist? Do you feel confident about your giving habits now, and have plans to continue to increase it in days to come?

In the book of Philippians, Paul writes,

“Not that I have already obtained this or have already reached the goal; but I press on to make it my own, because Christ Jesus has made me his own” (Philippians 3:12, NRSV).

What small steps can you take today to move from one money management and generosity type to another from the examples described above?

Source: Household financial planning survey 2013

Beryl Jantzi and familyAbout the Author: Beryl Jantzi currently serves as Stewardship Education Director for Everence, a Christian-based, member-owned financial services organization which is a ministry of Mennonite Church USA and other churches. 

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.

Image Credit: Piggy bank.

Frugal Fall: A Financial Self-Examination

During October, the COMPASS blog is sharing thoughts, tips, and reflections about having a Frugal Fall. Today, we are happy to welcome back regular contributor Nicole Brennan, a Marketing Assistant at Barnabas Foundation. Nicole shares some important ideas and reflections about a “Financial Self-Examination.”

Nicole and her friends having some fun this fall, on their visit to see Pope Francis while he was visiting the United States.

Nicole and her friends having some fun this fall, on their trip to see Pope Francis in Philadelphia while he was visiting the United States.

There is an underlying pressure to make the most of the hot weather during the summer months. My days and evenings were booked trying to squeeze in bike rides, family outings, church fundraisers, date nights, and road trips. Now that autumn is upon us, it almost seems the slight chill in the air makes everyone slow down a bit. Take advantage of fall inactivity and whatever breathing room you have to assess your financial health!

I am very money-minded while travelling on a budget, but my “big-picture” finances tend to get a bit away from me. I have automatic withdrawal for all my bills and automatic deposit with my paycheck. Since everything is pre-programmed, it is very convenient, but the details (and my overall financial health) are sometimes lost. I recently asked myself these four questions to audit myself and see how I am doing.

Am I Following My Budget?

I use my credit card for everything- gas, groceries, clothes, and all the miscellaneous stuff in between. When the email comes saying “Time to Pay!” I look over the expenses to make sure they are accurate, maybe add them up if I have time, and spend my accrued points. If you haven’t made up a budget, a monthly spreadsheet in Excel only takes a few minutes to set up, and you can see your immediate monetary stats all in one place. If you already have one, now is a great time to update it, and make adjustments as needed.

What Do My Retirement Savings Look Like?

My financial advisor (aka- my dad) has always taught me to save, and it’s a value I hold near and dear. If you have a company retirement plan, take advantage of it! If not, then personally set one up ASAP! Your HR representative will be able to help if you are with a company. However, if you are an entrepreneur and/or don’t have company help, consult a financial advisor. (You can try to “go it alone,” but if you are unfamiliar with the financial world, it will be difficult. To get started, do some research about 401(k), 403(b), Roth and IRA options at IRS.gov.)This is a great calculator to help you understand what your projected retirement saving goals look like and where they need to be. It factors in rate of return, current and future salary, current age, age of retirement, and a few other factors. It’s fairly simple to understand, and there’s a handy glossary of common terms below.

Did I Use All My Benefits?

Most companies are re-upping for their health/dental/vision insurance and their HSA/FSA  (Health/Flex Spending Accounts) about this time of year. If you have these, have you taken full advantage of them? Have you gotten your annual physical and dental check-up, yet? If you have money left in your HSA/FSA, spend it! And speaking of your HSA/FSA, evaluate whether you need to add more or subtract some for next year.

Have I Donated to Charity and My Church?

During your self-audit, it’s very easy to adopt a “broke” mentality. “I’m so broke, I only have this amount in my savings!” “I’m so broke, I can barely stay within my budget!” “I’m so broke, I can only squirrel away a tiny portion towards my retirement!”  It also might be easy to deny tithing or giving to your church and charity, because of this mentality. The truth is we are abundantly blessed by God. We have enough, and the OPPORTUNITY for enough, to pay our bills, visit a doctor, and save what we can. It is an honor to bless those places and people when and where we can. There is a joy that comes from giving. Make room in your budget to experience that joy!

COMPASS resources explore the connection between faith and finances, so looking honestly at your financial health is an important spiritual practice. Deuteronomy 8:18 says, “But remember the Lord your God, for it is he who gives you power to get wealth.” (NRSV). It is essential to be wise with what God has blessed us with here on earth, and that means knowing and improving your financial situation as God gives you the ability to do so.

profileAbout the Author, Nicole Brennan: Hello there! I’m passionate about living a stewardly lifestyle, while being adventurous and frugal. I currently live in community with six other 20-somethings in downtown Chicago and work as a Marketing Assistant at Barnabas Foundation, a partner of ESC and COMPASS. In my off hours, you can find me volunteering at a nearby homeless shelter, enjoying live music with friends, or watching reruns of Parks and Rec. Email me at nicoletbrennan@gmail.com or tweet me at @BarnabasFdn.

This blog is a component of the Ecumenical Stewardship Center’s COMPASS initiative to engage young adults in conversations about faith and finances. Like what you see and want to know/do more? Visit the COMPASS web page and join the COMPASS community on Facebook.