Financial Inaction: Are You Falling for These Common Fallacies?

Financial Inaction: Are You Falling for These Common Fallacies?

“I’ll start a savings account next month.” “It’s just not the right time.” “I have too much going on right now to strategize.” Do any of these sound familiar? They are just a few variations on the most common excuses, fallacies, and pitfalls that lead people to put off financial action until it’s too late. As with all things in life — and particularly your asset management plan — an ounce of prevention is worth a pound of cure. Join us to examine the ins and outs of erroneous financial thinking, and how to turn it around.

“I can’t start saving for retirement because I need those funds for living expenses.”

Contributing even a small amount per paycheck to a 401k puts the entirety of those assets toward tax-deferred growth — meaning that you pay yourself first and Uncle Sam second. Essentially, a 401k offers the opportunity to give yourself a pay raise by reducing your current tax bill.

“The market is so risky right now — I’d better wait until things are stable to get started.”

It’s natural and wise to consider risk vs. reward, but focusing solely on the volatility of the market and avoiding risk could keep you from meeting your financial goals. The common term for financial risk aversion is “risk myopia,” and it is most common in those who think of themselves as stable, cautious investors. For example, keeping assets in cash may seem appealing because of its liquidity and ease of access — but what about the risk of inflation? The purchasing power of cash constantly fluctuates, even if the dollar amount does not. We age alongside our investments, and if you have big plans for the future — like college, retirement, or a trip around the world — it’s wise to strategize for steadily increasing wealth.

“The financial world is too complicated — I don’t have the skill or knowledge required.”

This is a common pitfall among first-time investors and young adults new to the financial world. The good news is that the world of asset management is not complicated if it’s approached in the correct way. By working with a financial adviser, you can start small and delve deeper as you become more comfortable. Setting a target retirement date and calculating the corresponding amount from your paycheck to your 401k to achieve your goal is an easy way to start. Once the funds begin to accumulate, you’ll have more and more opportunities to diversify and invest funds in different asset classes. There are many options and opportunities even for the risk-averse investor, including index funds that track the US Total Market. On average, index funds outperform a whopping 80-90% of actively managed funds.

Working with OptiFour

If you’re serious about planning for your future, the first step is to be proactive and get in contact with OptiFour. We’ll work with you on asset management, estate planning, tax planning, and more. Visit our homepage for complete information on our services.