according to The Business Insider.
Financial advisors and planners have seen clients make a series of mistakes during the pandemic
Many were investment-related: timing the market, liquidating assets, and stopping retirement savings.
They also saw people who neglected major savings and were not strategic about paying off debt.
During the pandemic, I used my space time to make more money: weekly budget confirmations, monthly in-depth financial reviews, new investment accounts, using credit card points, and challenging to increase the amount of monthly savings.
While I gained many accomplishments, I also found myself making some mistakes, from investing in stocks I knew nothing about to saving money in low-interest time deposits when I could make better choices.
Since I didn’t know I was going to make these mistakes until it was too late, I asked five financial advisors to share the biggest mistakes they saw their clients make during the coming pandemic and how we can make sure we don’t go down the path of these blunders.
1 Timing the market
As a stock rookie, I find myself spending a lot of time trying to understand the best strategies for investing in the market during a pandemic. When many people I know pulled their money out of the market last March, I wondered if now was a good time to put money in.
May Jiang, a certified executive accountant and financial planner, says some clients make the biggest mistake of selling their investments and keeping the cash, waiting for the market to recover from the turmoil of a pandemic.
They fear that a pandemic will cause the market to collapse and their portfolios to lose value, and as a result they sell when the market falls and lock in losses permanently,” Jiang said. If they had ignored the volatility of the market, their portfolios would have experienced the ups and downs and still seen significant appreciation. Fundamentally, the U.S. and U.S. global economies are growing. “
No matter how volatile the market is in the short term, it is important to remember that in the long run, he will keep going for hundreds of years,” said Jiangmei.
That’s why we should always put our money towards long-term growth,” Kangmei continued. This will leave you high and dry, and almost certainly your money will grow well. “
2 The wrong way to pay off debt
Kelly Welch, a financial planner and vice president and wealth advisor at Girard Advisory Services, says some people who had a lot of cash during the pandemic chose to pay off their debt the wrong way.
Instead of starting at the moment when income allows and not paying more on a lower-rate mortgage, people may want to consider putting more money toward higher-rate student loans or auto loans,” Welch said. By prioritizing higher-rate debt for payment, you can reduce the impact of interest later. “
Welch also notes that people spend too much money paying off debt.
When you find yourself with extra money, you may try to pay off as much debt as possible, but sometimes that’s not the best use of all available cash. If you want to use more money to pay off your debt, consider the following: If the interest rate on the debt is lower than the interest you might earn by investing that extra money, then invest that extra money,” Welch says. That way, if you are willing to take some risk, the extra income you may earn from your investments, while not guaranteed, may exceed the low interest rate generated by the debt. “
3 Neglecting emergency savings
Too many Americans don’t have the money for emergency savings during 2020, so take some pain to remember the lesson,” said Pam Krueger, a certified financial advisor. “
If you’re a young working professional, a good first step is to fight for enough money to cover six months of living expenses,” she continued. If you’re retired or about to retire, you’ll need more: Krueger recommends setting aside at least one to three years’ worth of living expenses in a cash or cash-like account. “
The number may seem daunting, but you can start small,” she says. The goal is to set aside a few hundred dollars a month until you have access to a $1,000 emergency fund, which is a good place to start. And keep that money in a completely separate account so you don’t spend it or confuse it with normal expenses. “
4 Liquidate your investments
Because there are so many unknowns and uncertainties in the early days of a pandemic, some people feel it’s better to move their assets and investments into cash on hand.
Financial planner Stephanie Spies says that despite her advice not to do so, people make the mistake of liquidating their portfolios and cashing out.
These clients must not only determine when to exit the market, but also when to re-enter it-some are still waiting for cash to make the decision,” Spies said. “
5 Suspension of pensions
Financial planner Adam Laibson (Adam Laibson) has noticed clients suspend pension payments altogether during a pandemic.
He says it’s important to keep your contributions steady during a fading economy. Why? As the market goes lower, the same contribution will buy more shares and propel you farther as the market regains its footing, as it did recently,” Laibson says. The future you will thank the present for having the courage to continue investing at the wrong time. “
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