Finance: Reflections from 35 years as a financial adviser

Here are some reflections on 35 years as a financial and tax adviser:

Dumb Tax Mistakes

•  Paper-filing your return - think: slow and keypunch errors
•  Fudging the numbers
•  Failing to file or filing late - think: big penalties
•  Using the IRS as a savings account
•  Not taking deductions you are entitled to in the mistaken belief it will decrease your chances of an audit - guess again
•  Turning long-term capital gains into ordinary income by not waiting a few days
•  Buying municipal bonds because they are “tax free”
•  Doing anything just because it is tax favored or deductible
•  Failing to do tax loss harvesting with your portfolio - think: interest-free loan to the IRS
•  Assuming tax rates will go down - think: You have got to be kidding
•  Having large life insurance policies without a irrevocable life insurance trust -  think: gifts to the IRS
•  Not doing annual gifting if your estate will be taxable

•  Not diversifying - think: roulette
•  Leverage, leverage, leverage
•  Not understanding investments - think: four years in college to understand how to make a living and not investing time to learn the fundamentals of investing
•  Not having an investment philosophy
•  Expecting investments to conform to “your” timetable
•  Putting all your investments in a country with only 4 percent of the world's population and a mountain of debt - think: USA.
•  Ignoring emerging markets
•  Setting unrealistic expectations on investment performance
•  Assuming real estate, wages, stocks and investments will continue to go up - think: gravity
•  Using your home as a credit card
•  Not using 529 Plans for your children's college savings - think: tax free
•  Following the headlines to inform your investment decisions - think of a boy with a yo-yo walking up the stairs
•  Complacency - I know it is a pain to get rid of those losers but …
•  Failing to think long-term - successful investing is about slow and steady accumulation of assets over time
•  Holding investments to get long-term capital gains treatment without considering market risk

•  Impulsive decision making
•  Spending to your earning level - think: Oops!
•  Not staying on top of declining interest rates to refinance loans - the banker is not going to call you
•  Assuming you have to refinance to get a better rate because your mortgage has been sold on the secondary market
•  Deciding that vacation home is just what you need, then having to finance it
•  Failure to carry adequate life insurance
•  Failing to have a will - think: chaos and lots of fees
•  No estate plan to minimize taxes - think, again: gifts to the IRS
•  Ignoring reality - hey, a budget is just reality
•  Thinking Social Security will be there for you - hello!
•  Not setting financial goals and sticking to them
•  Not reviewing your financial plan at least annually
•  Putting off saving for retirement until your later years - think: $2,000 a year for 25 years earning 5 percent grows to almost $100,000
•  Lottery mindsets
•  Allowing emotions to influence your financial decisions
•  Not living within your means
•  Having no rainy-day fund
•  Living on credit
•  Not waiting to purchase something with cash
•  Not saving when times are good
•  Trying to keep up the Joneses
•  Keeping up with the Joneses
•  Not having adequate health insurance
•  Not teaching your children to be financially responsible - think: “The Return of the Dependents”
•  Not establishing good credit
•  Missing a great educational opportunity by not learning from your financial mistakes
•  Following the blind: advice from friends who may know slightly more than you
•  Loaning money to family or friends
•  Acting as a co-signer

•  Skipping a loan payment (Skipping a payment now only adds a payment at the end and you pay a lot more in interest.)
•  Extended warranties
•  Payday loans
•  Incurring prepayment penalties without obtaining a correspondent interest benefit

•  Tiger Woods tried to sell an image while privately maintaining a completely opposite life style. This resulted in the loss of endorsement deals, a drop in his game and a very expensive divorce. Talk about financial disasters.