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Do You Have Financial Blind Spots?

Sometimes, when we look at our finances, we don’t realize what we are missing. These blind spots can cost you in the long run, preventing you from making the most of your money. Missed opportunities, unnecessary expenses and other problems can arise from your financial blind spots.

As you create your financial plan, evaluate your situation, and be honest. Look for financial blind spots (and maybe even ask someone else to share what they see about your finances). Below are some common financial blind spots:

Mistaking Wants for Needs

Back in the earlier days of our marriage, my husband and I were struggling to figure out how to stretch our dollars and pay down debt. We were certain, absolutely sure, that we were cutting our expenses to the bone. Then, one day, we realized that we had cable TV. We went out to eat once a month, because “date night” was something we “needed” to have a good marriage.

We had been mistaking wants for needs. We slashed our cell phone plan, ditched cable and looked for ways to build our marriage without relying on going somewhere for dinner. Looking back, we had a huge financial blind spot. We were sure that we couldn’t cut anymore, but it turned out there was plenty left to cut.

Relying on a Retirement Account as Your Only Investing Plan

You know that tax-advantaged retirement account is a great tool to help you grow your wealth. However, it’s not the only way that you can take advantage of investing. There are other options as well. Investing outside your retirement plan can help you meet other goals, and avoid penalties. Don’t overlook the power of dividend investing [3], and make sure that you remember that long term capital gains [4] can be taxed at a lower rate than short term capital gains.

Overlooking Beneficiaries

From bank accounts to life insurance policies, it’s important to make sure that your beneficiaries are up to date. Many of us don’t think about what will happen to our money when we pass on. However, your HSA [5], retirement account, life insurance policy, and even your bank account all have rules about what happens to the money. Make sure that all of your accounts list the proper beneficiaries, and that you understand the way that your bank account will distribute your assets after your death.

Assuming that Things will Remain the Same

Your situation will change, and so will the economic landscape. As we found out recently, real estate values don’t always go up. And, while it seems as though we will be in tough economic times forever, chances are that the current economic doldrums won’t dominate your finances indefinitely. While you don’t want to abandon your financial plan at every whim, you also don’t want to make a plan that assumes that the status quo will always be the status quo. Add a little diversity [6] to your portfolio, plan ahead, and prepare safety nets. That way, you will be protected against big setbacks, and be in a position to take advantage of opportunities.

Do you have any of these financial blind spots? Or do you have other financial blind spots?

(Photo: evilpeacock [7])