Financial pros are highly skilled in making money for themselves, their firms, and clients–but are oftentimes equally unskilled at putting their own financial houses in order. In fact, the very aptitudes that lead to professional success can lead to disastrous personal finance decisions. Here are the five biggest mistakes to avoid.


As a commodities futures trader, Bill was comfortable with taking risk and managing his personal retirement portfolio. His eyes were always on the financial markets; he stood poised and ready to take advantage of any opportunities that came up. It didn’t quite work out the way he had planned, though.

Between 1992 and 2011, Bill missed six of the ten best trading days. He didn’t mean to… it was a coincidence; he was on vacation, sick, or mostly otherwise occupied, after all, those were also the busiest days for his clients. Bill has been beating himself up over this ever since. His negligence cost his retirement portfolio 4%. OUCH!

Bill would have been much better served by leaving a core portion of his retirement assets in a low cost equity index fund, which he now has. Bill told me his stress level has been cut in half by this simple step.

Other financial professionals err on the side of a complete lack of market timing. I saw an old friend of mine the other day who is the treasurer of a European Bank here in New York. Upon hearing that I was now a financial planner she said, “Oh! I have no idea what’s in my 401k!” This woman is fifty years old and has four kids! Don’t ignore your retirement assets; you are going to need them sooner than you think.


When I first met Ricardo, a bank executive, he was a self-proclaimed risk taker with investments to prove it. However, after performing his risk tolerance analysis, he turned out not to be such a cowboy when it came to his retirement portfolio or his family’s well being. With a significant portion of his retirement assets in just a few stocks, Ricardo’s portfolio risk was well beyond his comfort zone.

In addition, as evidenced by his Monte Carlo retirement projections, more risk does not necessarily equate to a higher chance of achieving one’s financial goals during retirement, especially after age 50. After reallocating to a well-diversified portfolio of equities, fixed income securities, and alternative investments, Ricardo was more confident of his chances for long-term financial success.


Do financial professionals have something against wills and trusts? We are all going to go, and I certainly don’t what the State of New Jersey deciding on who will be the guardian of my children or how to manage my assets. Can you imagine?! That’s what will happen if one dies intestate (without a will). Estate planning is the most important part of your personal financial plan. If you don’t have a will, go home tonight and find a good estate attorney. Have him draw up wills, healthcare directives, powers of attorney, and living wills. In addition you can discuss wealth transfer strategies.

Why give to Uncle Sam what you can keep for your heirs? You might also consider leaving your assets in trust for your children-even if they are no longer minors. A trust can protect your child’s assets from mismanagement, creditors, and himself. If I go, my nineteen-year-old son gets control of his chunk of change at age 35. Much to his dismay, I will still be in charge-even from the grave!


This is a concept well understood by most financial professionals and so I find it difficult to understand why they allow it to permeate their personal financial lives. Many financial professionals do not take full advantage of their tax-deferred savings options. Everyone, no matter what age, should be saving for retirement. One of the most efficient ways to save is through tax-deferred retirement savings accounts, like 401Ks.

For every dollar saved pre-tax through salary deferrals, one would have to earn $1.33 (depending on one’s tax bracket) in order to save the same amount on an after-tax basis. If you are self employed you can still take advantage of pre-tax, tax-deferred savings opportunities. Talk to your financial or tax advisor about the possibility of setting up a solo 401k or SEP IRA. With a solo 401k you can put away up to $49,000 pre-tax, and if you are over fifty you can benefit from the $5,500 catch-up contribution too.

Tax-deferred savings aren’t just for retirement anymore. You can save for your child’s college education using a 529 state sponsored savings plan or a Coverdell Educational Account. Similar to a 401k or an IRA, the funds in these accounts grow tax-deferred, and if they are used to pay for qualified educational expenses, like tuition, room, and board, then the contributions and earnings come out completely tax free. Some state 529 contributions are even tax deductible on your state tax return.


We are all familiar with that “Master of the Universe” feeling we get when a position moves our way. We feel powerful, smart, and unstoppable. Unfortunately, we are none of the above.

Reality check! The position will not go your way forever. You have to have a plan for getting out. Like it or not, we will all get old–eventually. We will be too old and infirm to work, but well before that day comes one’s earning power seriously diminishes. Think you will work your way right into the grave?

Think again. You need to have a plan for getting out of the work force just like you do for getting out of a position. Don’t let your “Master of the Universe” complex get in the way of prudent financial planning. The good news is that I can tell you right now what that escape plan is: Saving! Financial professionals often neglect their own savings because they think the good times will never end.


A rule of thumb is that one should be saving at least 15% of income for retirement. However, this is not always the case. The amount you need to save depends on your financial goals and how much you already have saved among other factors. Don’t count on Social Security. Depending on your age there may not be any left. Do you know how much you need to save for your retirement? Are your savings on target? Do you really need that vacation, that new watch, that piece of exercise equipment? Stop spending and pay yourself first by tucking away your savings every month before you start to spend.

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