Time and time again, individuals ask themselves: "What can I do to manage my finances more effectively?" While the answer to this question can vary from one person to another, people who have the greatest success managing their finances generally avoid most of the mistakes noted below.

Mistake #1 - No Plan
If you were to decide that you were going to take a driving holiday, chances are that you would pull out a map to determine the best or most scenic route to get to your final destination. Some people would call CAA to get their map service and others would buy software that would let them map out their own course. The point is that not many people would get in their car and start driving without a plan as to how they were going to get where they're going.

Your finances are no different. Yet a staggering number of people have no real plan in place to help them achieve their goals and objectives. Individuals who are most successful with managing their finances have developed short- and long-term plans as a road map that assists them in getting to where they want to be financially.


Mistake #2 - No Goals
The reason many people don't have a plan in the first place is that they haven't determined their goals and objectives. There are the obvious goals such as retirement date and estate goals, but most people have other goals over the course of their lifetime, both financial and non-financial. Many individuals haven't taken the time to articulate their objectives and then develop a plan to achieve them.


Mistake #3 - Time As a Friend
Time is probably your best friend when it comes to financial planning. It's very difficult to replace time without increasing your risk. The earlier you get started towards achieving your plan, the sooner you'll achieve it.


Mistake #4 - Time As an Enemy
Time is also an enemy for many people. Not only from the perspective that they delay executing their plan, but also in terms of how much or how little time they spend managing their finances or their plan. If you spend more time looking for a new stereo, refrigerator or car than you do managing your finances in a particular year, then time is probably an enemy.

Mistake #5 - "Chasing" Mentality
Too many people have a "chasing" mentality - that is, chasing the latest, greatest and best idea or investment. The key to determining whether an idea or product is appropriate for you is to consider whether or not it contributes to the achievement of your financial plan (which means, of course, that you need to have a plan in first place).


Mistake #6 - I Can Do It Myself
Most people need some kind of professional advice to manage their finances. Whether it is tax, investment, legal or other advice, most people cannot do everything themselves. Too many people try and do everything because they think they should be able to or they don't want to pay the fees that professionals may charge. Don't be foolish - know your limitations and get help. You wouldn't perform open-heart surgery on yourself, would you?


Mistake #7 - It's My Money
This is a mistake that some couples make. For reasons that are usually non-financial in nature, many couples manage their money separately. There are a number of reasons for looking at the total resources of a family, not the least of which is tax-related. The best reason to manage your money together is to make sure you achieve your shared goals and objectives.

Mistake #8 - "Lock In"
It's essential to remain flexible in your planning. Many people make decisions that they can't get out of or, if they can, it becomes very expensive. Setting up your plan to achieve your goals while maintaining flexibility is very important as both your plan and your goals and objectives will change over time.

For more information on how to avoid these common mistakes, consult our Wealth Planning series of educational handbooks or contact a ScotiaMcLeod advisor.

The information contained on this website is for use by persons resident in Canada only.