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Despite what you may perceive at the onset, most failures (financial included) are the result of a chain of failures, versus one outlying moment of error.READ THE ARTICLE
In order to break the chain and increase your likelihood of financial success, author Jesse Cramer proposes becoming well-versed on the five key “failure modes” of personal finance:
📌 Failures of measurement: Many financial mistakes stem from not tracking income, expenses, assets and liabilities. Regular measurement through budgeting and net worth statements is essential to understand your financial situation.
📌 Failures of understanding: Misconceptions or ignorance can cause financial failures. It's crucial to question assumptions and seek a deeper understanding of financial decisions and investments.
📌 Failures of planning: Not planning for known future events, such as required minimum distributions (RMDs) in retirement, can lead to penalties. Proactive planning can help avoid unnecessary taxes and financial stress.
📌 Failures of imagination: Ignoring the potential risks and unknown factors in financial markets can lead to significant losses. Understanding the possibilities and market history is vital for responsible investing.
📌 Failures of risk management: It's important to identify and mitigate financial risks. Insurance is one way to protect against unforeseen consequences.
You don’t need to hit home runs to reach your financial goals. Most often, it’s more about avoiding and preparing for the biggest risks than taking advantage of the biggest opportunities.