There is a lot more to successfully managing your investment accounts than you may think. Read on for two things you probably do for which it would be beneficial to get some help from the pro's.
Panicking In A Bear Market
According to behavioral finance theory investors make decisions based on emotions. Fear and greed are two examples, and CNN has captured these nicely in their Fear & Greed Index. This index follows which of the two emotions drives the market on any given day. Let's look at an example.
The market bottoms out, you panic and you pull your money out. That is a purely emotional decision. If you had made a rational decision, you would have decided to stay put. Because when the markets recover, you'll have to pay more to get back in than if you had stayed in the market in the first place.
There is a lot going on in the financial markets. However, instead of following the financial media on a daily basis and getting worried about what you hear, it's a better strategy to tune out the noise and look at the long-term, overall picture. A financial advisor can help you to stick to your financial plan.
Not Saving Enough And Spending Too Much
According to Bankrate's Financial Security Index of June 6-10, 2018, 23% of Americans have no savings. But saving money is important for a number of reasons. First, it will be difficult to retire if you don't have savings. I'ts not safe to rely on social security or a potential inheritance that you may or may not get.
Secondly, it's important to have access to cash in case you have an emergency, such as losing your job. Rather than having to rely on credit cards, which is expensive, it's better to have 3-6 months worth of money in a high-yield savings account. Working with a financial planner and outlining your financial goals in a plan will make it easier to start saving.
Budgeting also helps. Once you know your budget, it will be easier to stick to it and adjust your habits accordingly. A good general rule of thumb is the 50/ 30/ 20 rule.
According to this rule, 50% of your income should go to your essential expenses, such as housing, food, transportation and utility costs. It's prudent to set aside 20% of your income for your financial goals, such as savings, getting rid of debt and retirement planning. You then have 30% of your income left for lifestyle items and luxuries.