The Change-up 5.30.2023: Common Financial Mistakes

I hope you enjoy this short edition of The Change-up, my weekly newsletter sharing the latest market news and personal finance tips. If you're interested in learning more about working with me, send me a message or click my Calendly link at the bottom.

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Quote of the Week

"How many a man has thrown up his hands at a time when a little more effort, a little more patience would have achieved success?"?

-Elbert Hubbard

My View

I want to spend a little bit of time talking about the housing market.?

2020 - 2022 was a crazy time to be buying or selling a home. Houses were receiving double-digit bids within hours of listing, many $100,000+ over asking. This environment was encouraged by historically low-interest rates, free cash flow, and the COVID migration.

We now find ourselves in a different time. Inventories are dreadfully scarce because homeowners don't want to move on from their low-interest rate. The cost of borrowing has ballooned to over 6%. And home prices haven't budged.

If you are looking to buy or sell your home, make a calculated decision based on the current real estate environment, not on a prediction of what the market might look like over the next two years. I've heard of some home buyers purchasing more than they are comfortable with because they can refinance their mortgage when rates come down. Academically, that makes a lot of sense. But what if rates don't come down? The world isn't always academic.?

Finally, I'd encourage you to think about your primary residence as an investment, but not a monetary one. It's an investment into your family's future. It's a place to feel safe and make memories. Keep the main things the main things.?

As a financial planner, I'm blessed with the opportunity to walk with individuals and families in their pursuit of goals, both financial and non-financial. Through this experience, I've seen the most common mistakes people make with their finances.?

Let's talk about five big ones.?

1. Overcomplication

Financial planning really isn't too difficult. Identify goals, steadily increase your savings rate in a tax-efficient way, and buy quality assets. But people get bogged down because of the nuance of it all. The important thing to remember is it doesn't have to happen all at once. Take baby steps toward your goals.?

2. Debt

Debt is an anchor to financial growth. It can fix short-term issues, but cause long-term problems. If you're going to take on debt, make sure you are borrowing for an appreciating asset, not a depreciating one.?

3. Short-term thinking

Focusing on what might happen today or tomorrow has the potential to harm your long-term goals. A good example of this is getting out of the stock market when it's down in value. This reactionary decision could cost you big time when the market recovers. Do your best to view decisions from a 30,000 view.?

4. Avoidance

Ignoring problems doesn't make them go away. But, unfortunately, a lot of people avoid their finances and let the problems compound. Whether it's debt, budgeting, or even an estate plan, not dealing with the issue can actually cost you more time and stress than just knocking it out now.?

5. Tax inefficient

Taxes are a way of life, but good planning can reduce your burden and keep more of your money in your pocket. Vehicles like a 401(k), IRA, and HSA give you a tax deduction for saving money. Tax loss harvesting allows you to nullify capital gains and even earned income. Good estate planning helps you pass the most to your beneficiaries. Define your goals, and then use the most tax-efficient approach to get there.?

Let's have a week!

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The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate to complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Austin Coley and not necessarily those of Raymond James. Expressions of opinion are as of this date and are subject to change without notice. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct. Investing involves risk and you may incur a profit or loss regardless of strategy selected. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.?

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