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Financial Planning Mistakes to Avoid in The New Year

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Friday, January 27, 2023

Financial planning entails setting specific financial goals, saving habitually, investing those savings in wealth-building assets, and protecting your assets.

However, some financial planning mistakes can often lead to overlooking your budget and inviting unnecessary debt. While most of us know what we want to achieve with our money, it’s easy to take a wrong turn, making our goals even more out of reach.

To make 2023 a year of financial success, it will take a shift in how you think about money. Keeping your financial plan on track means avoiding common mistakes and doing the right things.

The new year is an ideal time to review and fine-tune your financial plan to ensure you’re still on track to achieve your envisioned goals and objectives and secure your financial future.

When it comes to setting goals, many people make the mistake of focusing on unrealistic or too many goals at the same time.

Saving for a house, paying off your student loans, and early retirement are all viable goals but trying to achieve all of them at the same time can be daunting.

A good strategy is to set goals that are feasible and reasonable within the timeframe available to you and make incremental progress toward them.

It’s normal to think bad things won’t happen to you.

A rainy-day fund is a crucial financial buffer and can prevent you from being trapped in debt when you’re hit with emergency expenses. They can happen to anyone at any time.

Any amount is an excellent place to start, but make a point to save 3-6 months’ worth of basic expenses in a high-yield savings account. Consider allocating any bonus money, tax refunds, or windfalls into an emergency fund.

An emergency fund can also be invested in low-risk yet highly liquefiable assets that can be readily converted into cash during contingencies.

Rebalancing is adjusting your investment portfolio to reassess and reduce risks.

Rebalancing a diversified portfolio can improve overall returns because not all asset categories, companies, or industries move together.

Since no one can perfectly predict market returns, rebalancing your portfolio at least once a year will mitigate market volatility, create a hedge against inflation, and help you stay on track with your investment strategy.

That said, don’t update your portfolio too frequently as doing this will cost you in terms of capital gains taxes, transaction costs, and exit loads.

With things looking good for you, it’s easy to be overconfident and ignore the risks of not having insurance coverage.

Insurance doesn’t mean the value you get after a certain period. It means peace of mind, ensuring financial security for our loved ones, and happiness for ourselves and our families.

While at it, avoid buying policies from relatives and friends on emotional grounds. Not only might this lead to loss of money but also the relationship.

Work with a trusted insurance agent, one who will not try to sell you a costlier policy than you need.

It is a common mistake not to look beyond traditional investment options.

In doing so, the real value of your money continues to erode over time. Yes, being over-dependent on “safe” investments like government bonds, savings accounts, etc. will lead to your portfolio providing returns at a rate lower than the inflation rate.

In the new year, try to explore new-age investment options that are tax-efficient and provide inflation-adjusted returns.

A pay hike can entice you to improve your lifestyle.

Resisting this temptation of lifestyle inflation is the smartest thing you can do, especially if you have a big goal, like purchasing a home, building a college fund for the kids, etc.

It’s okay to splurge a bit but do not spend beyond your budget. Instead, focus on saving the amount required to attain a financial goal.

If you have experienced a life-changing event such as marriage, having kids, or divorce, review your estate plan.

“Creating your own financial plan from scratch requires a lot of research and learning,” cautions Richard Lerner, Senior Vice President of Investments for David Lerner Associates. “Your financial goals get more complicated as you get older, busier, and (possibly) wealthier.”

An investment counselor can help you avoid expensive mistakes, encourage you to act, and help you remain disciplined.


While mistakes are part of the learning process, your financial planning slipups could cost you greatly in the long term.

You can tackle monetary problems more effectively using proper financial planning.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc.

This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances.

Member FINRA & SIPC.

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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