5 Mistakes That Can Sabotage Your Long-Term Wealth

We all slip up when it comes to handling money. But sometimes small infractions we think are no big deal, end up becoming mistakes that sabotage our long-term wealth. As you plan for your future, be careful not to make these five mistakes.

5 mistakes that can sabotage your long-term wealth

1. Carrying debt

Debt, especially consumer debt, is the mortal enemy of wealth! One of your first goals in protecting your long-term wealth should be to make a debt pay off plan and stick to it. The debt snowball and debt avalanche techniques are two effective ways to dig your way out of debt.

One thing you can start doing immediately is pay as much as you can above the minimum due on your debts. That way more money goes toward paying off the principal balance.

2. Committing common investing mistakes

One of the surest ways to build wealth is to start investing early and stay consistent. However, you also need to have a plan in place that ensures your investments are diversified and aligned with your timeline (aka when you need to use the money), asset allocation (aka the investment type) and risk tolerance.

It’s also easy to forget to rebalance your portfolio to ensure your investments always sync up to your asset allocation. If one investment performed particularly well, it could’ve thrown your allocation out of whack.

For example, your risk tolerance could have an 80 percent stock and 20 percent bond split. But if some of your stocks do well, you could be at a 90 percent stock and 10 percent bond allocation, which no longer aligns with your risk tolerance.

You also need to understand how investments impact your tax strategy.

3. Failing to put a tax strategy in place

Of course, you have to pay your taxes, but it’s a time-honored American tradition to figure out how to work within the rules to pay the least amount possible.

You should aim to take advantage of every opportunity to lower your tax liability. In turn, you can use that extra money to save and invest more in building your wealth.

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