7 Really Bad Financial Moves and How to Avoid Them

3. Not planning for retirement until you retire

Think you don’t need a financial plan or that you’re too busy to create one? That can be costly. Karen Altfest, executive vice president at Altfest Personal Wealth Management in New York City, cringes at the thought of one sit-down she had with a client.

“The man said, ‘Could you help me know if my portfolio will last through my retirement?’ ” she recalls. “I asked him when he was planning to retire, and he responded, ‘I retired last month.’ ” To her, the question came years, if not decades, too late. Too many people “forfeit the time factor in planning for their goals,” she says.

That’s not to say a plan can’t be assembled at the 11th hour, Altfest adds. She reviewed her client’s portfolio and assets, talked to him about his risk tolerance and financial goals, and explored the costs of staying where he lived versus downsizing.

“What I could not do was tell him how to save more and plan better for a retirement that was still years away,” she says. “If he had made that call to me some years earlier, I might have presented him with a variety of ways he could have prepared for his and his family’s future.”

The fix: Get started on a blueprint for estate planning, tax strategies and other key components of a retirement plan in the years leading up to retirement.

4. Chasing volatile investments

Sure, bitcoin has made some people rich. But the wildly volatile digital currency has saddled many others with devastating losses due to huge downdrafts after hitting all-time highs. Chasing speculative, unproven investments when prices are skyrocketing often ends badly. History is littered with fad investments that went boom then bust, from tulip mania in the 1600s to the dot-com bubble of the late 1990s.

Cryptocurrency may have become more mainstream, with a growing number of large financial firms investing in Bitcoin and President Donald Trump signing an executive order in March establishing a national strategic Bitcoin reserve, but the crypto space remains speculative, says Tim Steffen, director of advanced planning at Baird Private Wealth Management in Milwaukee, Wisconsin.

“The thing to be careful with is all these offshoots of Bitcoin, all the other digital coins that have been created,” Steffen says. For all their growth, he says, cryptocurrencies have no intrinsic value: “You only make money on [crypto] when somebody else will pay you more for it later. It’s not investing in a business. You’re not buying real estate.”

The fix: Stick to established investments such as stocks, bonds and real estate and diversify your holdings so you don’t have all your eggs in one basket. If you do want to dip into crypto, make it just a sliver of your overall portfolio and use money you can afford to lose.

5. Investing emotionally

It’s tempting to bet big in a bull market and buy when prices seem to be going up, up, up and easy to get spooked and sell when the Dow falls off a cliff. It’s also dangerous. “The emotional roller coaster is responsible for more wealth loss than probably any other single factor,” says Neel Shah, a partner at Omni 360 Advisors in Plainsboro, New Jersey.

Ignoring time-tested financial principles — buy low, sell high, stay the course during market downturns — is a recipe for investment failure, says Thorne Perkin, president of New York–based investment management firm Papamarkou Wellner Perkin.

“The stock market is the rare store where people race for the exit at the sight of discounted prices — when everything is on sale,” he says. “While staying the course can be difficult to do when financial markets get tested, history has shown that steadfast investors reap rewards. Investors are well advised to maintain some patience.”

The fix: Maintain a disciplined approach and regularly revisit your risk tolerance to ensure that you’re meeting your goals, Shah says. If you think you’re prone to panic buying or selling, seek out a financial professional to guide you.

6. Helping the kids too much

Supporting adult children financially for too long can backfire if paying the kids’ bills burns through assets meant to safeguard your own retirement, says Anthony Ogorek, president and founder of Ogorek Wealth Management in Williamsville, New York.

“Assistance for kids is very expensive,” he says. “Oftentimes parents say, I want to help out Susie or Johnny with the down payment on their home or subsidize them to the tune of $500 or $1,000 a month.”

Do that only if it doesn’t negatively impact your retirement readiness and security, financial pros say.

“It’s just a matter of can you afford it,” says Steffen. “Some people feel an obligation to provide for their adult kids to their own detriment.”

The fix: Run the numbers and understand the risks. Is the money you’re spending on adult children going to force you to work longer? Are you saving significantly less for retirement? If you find yourself worrying about running out of money later in life, think twice about your level of financial support to the kids.

7. Upsizing when you should be downsizing

Conventional wisdom says empty nesters should sell the big house that’s paid off (or has tons of equity) and use the proceeds to pay cash for a smaller place. Ogorek says he’s recently seen older clients “who fell in love” with a home and did the opposite: “They’ve actually upsized,” and borrowed to do it.

“Instead of being able to extract equity out of their house, they’ve actually leveraged themselves up because this is something they want at this point in their life,” Ogorek says.

The trade-off for that dream house with a view of the lake or the ninth hole is a new mortgage, bigger bills (to heat and cool more square feet) and a smaller nest egg to fall back on.

Ogorek says that unless you have very deep pockets, upsizing your house could be wrong-sizing your finances at the wrong time of life. Otherwise, he adds, you’ll need to “count on being able to work through retirement."

The fix: Conduct a thoughtful analysis of where and how you want to live in your golden years. Run the numbers to ensure the cost of a pricey dream home fits into your retirement budget.