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I spent a lot of time this year focused on my finances. I started off with a hefty goal of saving 21% of my income throughout the year and committed to sticking with a very tight budget. But as I get ready to close out the year and do an inventory of my finances, I’m starting see some of the blunders I’ve made with my money this year.
I knew I wasn’t alone in that, which is why I asked four financial advisors to share the top money mistakes they saw clients make in 2021.
1. Not knowing where your money is invested
While 2021 was a year I put even more of my cash in the stock market and into funds, I don’t have full clarity on what I invested in. Financial planner Scott Turner said this was a common mistake this year that he saw with his own clients.
He gave an example — a client who had picked both a Target Date Fund in their 401(k) plan and then two other mutual funds — and said that all three investments had overlap with each other and were invested in the same things.
“Which is kind of like ordering a salad as an appetizer, a salad as a main entree, and a salad as a dessert,” said Turner. “That’s problematic, inefficient, and adds unnecessary risk.”
2. Not setting a budget for holiday spending
I committed to a very intense budget this year, which I was pretty good at sticking to until the holiday season. Perhaps there’s extra cheer in this air this year because according to financial planner Chuck Zuzak, I’m not alone with that mistake.
In the future, Zuzak recommends looking at the holiday season as a time to protect your money more than usual.
“Retailers use flash sales and limited time offerings as an inducement to buy,” said Zuzak. “By knowing exactly how much you intend to spend, you won’t be tempted as much to buy more than you need just because something seems like a great deal.”
3. Making decisions without thinking long-term
With the ups and downs of the economy and market this year, it seems like a lot of people were making a lot of quick decisions with their finances. Financial planner R.J. Weiss said that prioritizing instant gratification when it comes to your money is a mistake.
“Most people make financial decisions based on what they think will give them gratification today,” said Weiss. “For instance, a lot of people make career choices thinking very short-term, instead of where they want to be five years or a decade from now.”
4. Jumping on trends and caving to FOMO
Whether it was breaking news about the Gamestop stock or a popular cryptocurrency on the rise, this year people were open about their money moves and investments.
While that might have caused a big influence among both rookie or seasoned investors, financial planner Olivia Summerhill said the fear of missing out and caring too much about what other people are doing with their money can be a really big mistake.
“When it comes to money and your lifelong values and goals, we should avoid comparing and judging what our friends and family are doing with their money and focus on ourselves,” said Summerhill. “The mistake that is made most often is that people hear about someone else getting rich quickly and want to get in on the action for fear of missing out.”