When we got our first big snow of the season I went out to the garage to fire up the snow blower. I opened the gas cap to fill the tank and noticed that there was still some gas in it from last spring. Bad sign.
After failing to start the snow blower, I gave up and drove over the snow covered driveway and went to work. By Saturday the driveway was no longer covered in snow – it was covered in about 4 inches of ice. What should have taken about half an hour with the snow blower took several hours with a shovel and ice pick.
A series of smaller mistakes…
When you spend a weekend shoveling snow and ice off the driveway, you have a lot of time to think. In addition to finding creative new ways to express myself through language, I realized I could have avoided this problem, if I had avoided a number of smaller mistakes that had been made earlier in the year.
Mistake #1 – I left gas in the snow blower rather than draining it in the spring.
Mistake #2 – I waited until the first major snow to check the snow blower.
Mistake #3 – I chose to drive over the snowy driveway for a week rather than clearing it off before it turned to ice.
Chiseling away at the problem I had created, I wondered about some of the financial problems people create for themselves. To avoid big problems tomorrow, don’t make these smaller mistakes today.
Mistake #1 – The wrong IRA beneficiary. Having the wrong beneficiary designation on an IRA or retirement plan can have a huge impact on your assets when you die. This is one of the most common, and easily fixed, mistakes people make.
People get married, divorced, have kids, and grandkids, etc. Beneficiary designations are one of the most important parts of your financial plan. They are simple enough to change while you are living, but having the incorrect beneficiary designation means your IRA or retirement plan may go to the wrong person when you die – like your ex-spouse for example.
The wrong beneficiary designation could also have massive tax consequences. Imagine your entire IRA or retirement plan balance being taxed upon your death. In some cases up to half your IRA could end up going to the IRS rather than your family. Occasionally these cases go to court. Rarely is the beneficiary designation overruled. Save your beneficiaries from major problems when you die. Update your beneficiary designations now.
Mistake #2 – No will. The majority of Americans die without a will. Countless others die with wills that are out of date, inadequate or incomplete.
When a will is in place it tells the probate court and others how assets are to be distributed at death. Without a will the court has no way of knowing what your intentions are. In those cases, the state determines what happens to your assets, who serves as guardian for your children, and manages your affairs. With a will you get to determine these things. Perhaps more importantly, a will saves your family the unnecessary burden of trying to sort everything out after you are gone. Avoid this problem by talking to a qualified estate planning attorney and creating a new will or updating your existing documents.
Mistake #3 – No Insurance. The third big mistake is having the wrong amount or type of insurance. No one wants to buy insurance. However, having the right type and right amount of insurance can be the key to the success of your financial plan and possibly your family’s financial security.
Even if you have the right amount and the right type, is it owned in the right way? Life insurance owned in your name, for example, could be subject to estate taxes upon your death. Life insurance purchased through work may be contingent upon your employment. Term insurance could expire before you do. What about disability and long-term health care insurance? Both of these could have a profound impact on your financial security, as well.
You know you need to double check your beneficiary designations, update your will (or get a will in the first place), and/or purchase that insurance policy, etc. Addressing these issues today is relatively easy and simple. Failing to do so may not matter much now, but eventually time will be up and you or your family will have an even bigger problem in the future; one that can’t be fixed.
I was able to get my driveway cleared off. It cost me a weekend and about $150 in repairs. Unfortunately, with financial planning the stakes are a lot higher. What small mistakes are you making ? Fix them now before they become a big problem later.