• Wed. Apr 24th, 2024

Here’s Where My Broke Clients Always Go Wrong


Jan 18, 2024 #Broke, #clients, #Heres, #Wrong

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When it comes to financial planning, many people don’t know how to go about it in a way that lets them build wealth or financial security. Because of this, a lot of people turn to financial planners to help get them on track and achieve their short- and long-term financial goals.

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Unfortunately, just having a financial planner isn’t always enough. Even with the best advice, a lot of people struggle to break their bad money habits and build better ones that help them gain some much-needed financial independence.

While there are many possible reasons for this, certain money habits — or financial mistakes — are more prevalent than others. GOBankingRates spoke with Dr. Kate Mielitz, an accredited financial counselor at Beyond Finance, and Jung Seh, a CFP and financial advisor at Bogart Wealth, to talk about where their broke clients tend to go wrong with their finances. Here’s what they said.

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They Don’t Practice Enough Financial Discipline

One of the biggest reasons why financial planners’ clients tend to stay broke is because they often spend money they don’t have — or that they should have saved.

“Saving money isn’t always a walk in the park, and without sound financial discipline, some people get carried away with their spending,” Mielitz said.

This can lead clients to spend excessively or limit their ability to save.

It’s all too easy to spend money when you don’t have a realistic spending plan or budget, which is why Mielitz advised making one before shopping. This can cut down on unnecessary expenditures and make it easier to resist temptation. She also suggested using cash only and avoiding Buy Now, Pay Later plans or credit cards.

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They Don’t Work With the Right Team

Mielitz said that one big area where many of her clients go wrong is that they don’t have the right people on their side.

Having a good financial team — whether that includes financial planners, debt resolution specialists, tax advisors or otherwise — can keep someone on track with their finances and help them build wealth.

But the alternative is also true. Without the right people advocating for them, it’s all too easy for clients to stay broke.

They Don’t Have Realistic, Actionable Financial Goals

Without short- and long-term financial goals, it’s hard for anyone to build wealth, even if they’re working with a financial planner. But it’s not only about having goals — it’s about setting ones that work for the individual, rather than their peers.

“Your financial goal needs to make sense for you,” Mielitz said. “Please don’t compare your goals against other people’s goals. Your financial reality is yours, so align your planning and goal-setting with your values. Setting sustainable goals to get out of debt is a healthy financial behavior to create, no matter how much money you have in your account at the end of the pay period.”

They Don’t Set Clear Expectations of Themselves

Creating financial stability requires setting clear, realistic expectations of oneself. But many people don’t take the time to do this, which leaves them living paycheck to paycheck. And it’s not just low- or moderate-income earners who have this problem. Many high-earners do, too.

Mielitz noted the importance of her clients being honest with themselves and setting expectations — not just for themselves but for their friends and family, too.

“Yes, it’s hard, and uncomfortable, to say, ‘I can’t afford it,’ but it pays off when you have money in your account at the end of the pay period,” Mielitz said.

They Don’t Have a Financial Plan

This one might seem obvious, but it’s still worth mentioning as not having a clear financial plan is a major reason why many of Seh’s and Mielitz’s clients stay broke.

“Have a plan,” Seh said. “If you are in your working years or retired, having a sound financial plan will show the path of actions you need to take and how to plan for the unexpected.”

Mielitz further suggested giving every dollar a job in that plan. No matter how big or small it might be, this can help ensure that hard-earned money is going where it needs to go.

They Don’t Account For the Little Things

Those little things add up, and fast. But not accounting for these small expenses is a common issue Mielitz sees in her line of work.

“To make any savings goal reasonable, you must account for things that come up — holidays, birthdays, a quick meal out because someone stole your lunch out of the fridge, grabbing a drink with a friend, that Friday morning, ‘I made it through the week,’ bagel and coffee, and so on,” Mielitz said. “You have life to live; you’re probably going to live it, so account for it in your spending plan.”

They Don’t Communicate as a Couple

Seh said that many of her broke clients stay that way because they don’t communicate with their partners about their finances.

When you share finances with someone else, you must learn to be transparent and communicate about money well. Otherwise, it’s much harder to achieve financial goals or even to have a realistic budget that works for everyone.

They Rely on Debt To Get Them By

According to Seh, many of her broke clients rely heavily on credit cards or other forms of debt to furnish their lifestyles. Not only that but they don’t pay off their balances each month. This often leads to high-interest charges, especially in cases where they consistently carry a high balance.

Seh always tells her clients to pay down their debts. But before that, she suggests paying oneself through a retirement plan as this can help with long-term financial stability.

They Don’t Weigh the Pros and Cons of Their Purchases

Many people spend money without truly reflecting on their personal values or what matters most to them. Not only can this lead to some regrettable spending decisions, but it can also keep them broke.

With her financial planning clients, Seh always tries to emphasize the importance of considering the pros and cons of any purchase, especially major ones like home renovations, vacation homes or boats.

By doing this, and by prioritizing things based on value, it can help individuals take control of their finances, maximize their money and build financial security.

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This article originally appeared on GOBankingRates.com: I’m A Financial Planner: Here’s Where My Broke Clients Always Go Wrong

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