Recently I took an amazing flight with my son, Devin, to St. George, Utah, near the Grand Canyon. Devin is a certified private pilot studying for his instrument rating, so it was a big help to have someone with his skill and knowledge in the copilot seat helping with navigation, communications with air traffic control, and helping to perform crosschecks – all of which make for a safe flight.
We cruised above the Rocky Mountains at 17,000 feet, and at that altitude, you have to pay special attention to your oxygen levels. We kept our pulse oximeters on for most of the trip, which isn’t a technical requirement. But I always do my absolute best when it comes to getting out ahead of any potential issues that could occur over the course of a flight.
As we proceeded on our IFR flight plan, monitoring our O2 levels, overall systems and weather conditions, it got me thinking about some issues we’ve helped friends and clients get ahead of recently on the ground at Keen Wealth. So on today’s show, we talk about my big flight, and also about some common financial mistakes you can avoid with a little safety prep of your own.
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Key Insights on Avoiding Financial Mistakes
1. Mistakes to avoid when buying a car.
– Do some research ahead of time. I’ve never met anyone who enjoys going down to a dealer and haggling with salespeople. But the internet can arm you with some info to make the process a bit more bearable. If you know what kind of car you’re looking for, click around local dealers’ websites and get a ballpark figure of what the cost should be. Also, keep an eye open for holiday sales and year-end events.
The Kelley Blue Book® website is an excellent place to start your car research and get a sense for what cars cost, and what you can sell yours for. Visit the site here: https://www.kbb.com/
– Keep your budget to yourself. The first question most salespeople will ask you is, “How much would you like to spend on a car?” Well, my answer ideally would be … zero! But if you start throwing out numbers, the salesperson is going to start throwing out cars and offers that might not be in your best interests.
– Don’t talk about your trade-in right away. If you don’t have a firm idea of what the car you want is going to cost before you factor in your trade-in, the numbers you get from the salesperson are going to be cloudy.
– Don’t say you’re planning to pay in cash. There was a time when paying for a car in cash might have helped you lock in a lower price. But that was before all the major car brands created their own financing divisions. Now, just like if you give a salesperson your budget or a trade-in proposition, saying you want to pay in cash can lock you in to a price before you even start negotiating.
2. Buy yourself an umbrella.
Do you have an umbrella insurance policy for your home?
You should. The point of umbrella insurance is to provide you with extra liability coverage over and above what you have in your base coverages. Typically umbrella policies range from $1 million to $5 million, and they don’t kick in until your other coverages have been exhausted. Because most people will never incur damages that high, umbrella policies tend to be very affordable. The peace of mind a few hundred dollars per year provides will be worth it – especially if your home has a pool, trampoline, etc.
3. Zero percent interest does not mean free.
If you’re out shopping for “dads and grads” you might be seeing zero percent financing offers on big-ticket items like furniture, TVs, and computers. Many of these offers only require low monthly payments over the term of the financing, which can be a big help if you’re trying to fit a big purchase into your budget. Just don’t forget that if you haven’t paid the full balance by the end of the promotional financing period, you’ll probably have to pay all of that deferred interest. Most of the time, just paying the minimum due won’t add up to the full cost of your purchase. Instead, it might be a good idea to divide the total price by the number of months in the promotional period and pay that amount every month instead.
I know many of my clients are so averse to debt, especially as they age, that they’d rather make these big purchases in cash. And that’s fine! Just remember that as long as you avoid budgeting mistakes and pay your bills on time, debt is not inherently bad.
4. Avoid “payday loans.”
Some debts, however, ARE inherently bad. And few are worse than the “payday loan” shops you’ve probably seen popping up in strip malls. I cannot recall even one of our clients who has actually gotten involved in this type of loan. But we have seen cases where their kids or grandkids have. For that reason, we felt it important to discuss today.
In my opinion, a better description for what you get from these places would be “predatory loans.” Using these services to acquire a loan can put you on the hook for double-digit interest charges in just one week. From there, the fees and interest can snowball astronomically: up to 1950% under current Missouri law! We’ve seen firsthand at Keen Wealth the kinds of complex legal fights that can ensue when folks try to get out from under these loans.
Of all the mistakes we’ve discussed today, this one is the easiest to avoid. Even in the direst emergency, you have better options available to you. Encourage your loved ones to run – not walk – away from payday loans and towards a reputable financial institution. Also, remind your kids often that having a solid emergency reserve is the best safety net for financial emergencies.
And remember, if you’re ever unsure about a financial issue or worried you might be making mistakes, don’t hesitate to come talk to us at Keen Wealth. We pride ourselves on taking a proactive approach that controls the variables we can control, and steering our clients around potential pitfalls.
Bill Keen on Avoiding Financial Mistakes …
“The best way to avoid financial mistakes is to get out ahead of any potential issues.”
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Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
Keen Wealth Advisors is a Registered Investment Adviser. Nothing within this commentary constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Keen Wealth Advisors manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed here. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.