3

The Four Financial Pitfalls–and How to Avoid Them

There are no accidents. There are no failures. There are only results. Every decision that we make yields an outcome.

Anybody who considers themselves financially secure has exhausted a plan to get them to that point. Like an Olympian, your process of manifesting the wealth illustrated in your dreams requires sacrifice, focus, and perseverance. That’s why it’s so important to start when you’re young so you have the room to fail fast, to bounce back with energy and enthusiasm, and to make mastering wealth-building a lifelong practice.

But before you can master a plan, you have to develop one. Your financial plan is the compass that will guide you from your current condition to your future position. Most wealth management books first provide instructions on how to develop a plan, and then discuss the hurdles you may face along the way. In the spirit of counterintuitive thinking, I’m going to start with the four financial planning pitfalls. I guarantee that if you keep these in mind while you are developing and mastering your plan, you will stay on the right path to long-term wealth generation.

If you see your current self in the descriptions of any of these four pitfalls, do not be alarmed. That just means you are one of many, and by becoming aware of what is blocking your path you are taking the first step to removing it. Being objective in your assessment of yourself will give you the room and freedom to truly follow your plan.

Four Financial Pitfalls—and How to Avoid Them

1. “I don’t have enough money.”

2. Peer comparison.

3. “I’ll do it myself.”

4. Impatience.

Pitfall #1: “I don’t have enough money”

“I don’t have $250,000 to invest, so no one will want to work with me.”

If you think you don’t have enough money to begin planning for your goals, you’ll never have enough money. In the investment industry, there is no designated asset number that makes you more or less qualified to begin financial planning. And luckily, the days of our grandparents’ financial advisors (and their required minimums) are long gone. Thinking that you don’t have enough money blocks you from getting the advice and direction you need to help you grow whatever you do have. And if you wait until the point where you feel like you have enough, you will have less time to implement the plan that you thought you needed $1 million to initiate.

Things are continually getting more expensive and more taxing on the Master Wealth-Builders who pursue their wildest dreams. Start now, while you have the time. Even a teenager with an after-school job can start mastering their plan by opening a Roth individual retirement account (more about these in chapter 5). The point is: No matter what you have or don’t have, right now you have time. Use it. Master it. You won’t regret it.

Pitfall #2: Peer comparison

In interviews with prospective clients, it blew my mind how many people knew (or thought they knew) the financial position of their peers. These comparisons inclined people to think that their assets were supposed to appreciate faster, that planning came second to risk-taking, and that they were “poor” although to me they were perfectly fine in financial terms.

A millionaire on a block full of billionaires will consider himself poor. But in reality, he’s better off than almost everybody else in the country. Comparing yourself to your peers is the quicksand for the practice of lifestyle inflation, the tendency to spend more as you earn more. This costly habit has a domino effect that makes it extremely difficult for you to pay off debt and accumulate real assets. You begin to develop an affinity for acquiring things that you do not need and carry liabilities that will slow or stop your progress.

If you ever feel yourself comparing your own situation against your peers, stop and kick in the power of counterintuitive thinking. You will never truly understand how someone else reached their current financial status, and trying to make that comparison will only lead you to behaviors that are counterproductive to your plan. Comparison will influence you to make brash and often emotional decisions that could lead you away from your goals. Her story is not your story. His stocks are not yours.

Forget about the Joneses and how much money you think they have. Instead, foster a tunnel vision that focuses only on improving your financial status and inching you closer to your goals. Wherever you are, you are in a great spot to keep on moving along with your plan. You are the only one who can decide on your goals and the only one who can carry out your financial game plan. Keep your energy and focus in this productive place.

Pitfall #3: “I’ll do it myself”

Let’s have a brief slow clap for all those who can do it themselves. All two of you. All right! Now let’s talk about what the rest of us can do.

When it comes to financial planning, there is a small group of people who can handle their financial plans from creation to implementation all by themselves. It’s amazing. They’re amazing. But what goes into doing it and doing it right is a lot of time. You’re going to have to research investments, stick to a plan, and monitor everything diligently in order to make the correct moves so that you don’t sell investments prematurely or make emotional decisions, and can harvest gains at an opportune time. These are all things you likely won’t have the time to do consistently and with an objective eye. It is important to step outside of our egos, take with a grain of salt all the “water-cooler talk” about what everybody else at work is investing in, and seek help and accountability from a professional.

Pitfall #4: Impatience

Impatience makes wealth building impossible. Impatience leads you to change a sturdy plan multiple times to harvest small gains before they can grow into much larger ones. The lack of patience is like digging a seed from out of good soil before it sprouts. All plans take time, and most of your success when it comes to financial planning will be attributed to what you decide not to do rather than what you actually do.

Patience pays and the lack of it costs. It’s that simple. When your perspective shifts to embrace this principle, your habits will as well. You have to starve your impatience and feed your discipline. This is where you have the advantage as a younger person. Whether you’re a Gen Xer or a Millennial, you are many years away from the big retirement milestone, and perhaps still several years away from others. You have the time to practice the patience to stick to the plan.

Being young in this era means a number of things. You are encouraged to explore any and all possibilities. You are in a period of solstice in which you will likely experience the extremes of good and bad, and whatever happens you are young and vibrant enough to move along with hope for the future. Your creative juices are flowing and you have a knack for using and learning all of the new technology hitting the market. Unlike our parents and grandparents, you have access to all of the resources and information to build what you want, learn what you want, and manage life however you want.

Still, today’s young professionals face unique challenges. The culture of the thirty-something-year-old in the modern era is much different than that of the young professional in the past. The technological age has conditioned growing adults to expect instant gratification for professional and personal goals alike. These expectations can breed a sense of entitlement and a lack of steadfastness that creates barriers to achieving every single goal that people make for themselves. Don’t let that happen to you. This time provides the perfect opportunity to set the tone for the rest of your life and build great habits so later on down the line you won’t have to spend your increasingly precious time breaking bad ones.