How to avoid 5 fatal financial flaws

You don't have to be a financial expert to achieve financial success

managing the family's finances
You don't have to be a financial expert to achieve financial success, but you do need to avoid some key fatal flaws that can threaten your future financial well-being. According to Lois Vitt, Ph.D. and Karen Murrell, co-authors of the new book "You and Your Money: A No-Stress Guide to Becoming Financially Fit," there are common flaws that seem benign at first glance, but can significantly impact an individual's ability to achieve long-term financial success. Take control of your personal finances by avoiding some of these key mistakes.

1. Miscalculating Retirement Needs

It's important to determine how much money you'll need to save to retire comfortably and to develop a plan save for retirement. If you miscalculate how much money you'll need for retirement, you will have to work longer than you planned or figure out how to live on less. When calculating the amount you'll need for retirement, keep in mind that although you might save money on clothing, commuting, and other costs associated with earning a living, your healthcare expenses may be higher. A general rule of thumb is that you can expect to live on 70 to 80 percent of your pre-retirement income.

2. Inadequate Insurance Coverage

Health care costs are skyrocketing at the same time when people are living longer than ever before. These are two important reasons to make sure that you have adequate insurance coverage. Having adequate insurance will help you avoid using your savings for unexpected things such as medical expenses or expenses resulting from an accident. Review all your insurance policies including health, home, car and life, regularly to ensure that you have adequate coverage.

3. Inappropriate Use of Equity

Home equity is the single largest financial asset for older Americans. As seniors age, they may choose to tap into these assets by getting a home equity loan. Others are tricked into using their home equity through home improvement scams. The best uses of a home equity loan are those that improve your financial situation such as debt consolidation, home improvement and education. These are wise uses of home equity because your money is invested in something that grows. Unproductive uses of a home equity loan are for things that depreciate or do not create an asset such as buying a car or paying for living expenses.

4. Lack of an Estate Plan

No one wants to think about death but failure to do so could mean that your wishes are not honored. Estate planning addresses how to best preserve your assets after you die. No matter your age, if you own a house and furniture, a car, or have money remaining in a retirement fund, you need to protect it through estate planning. Failure to draft an estate plan will add uncertainty, legal problems, and lengthy delays in distributing your assets when you die. There are several ways you can protect your estate including establishing a will, considering creating a trust, and designating powers of attorney to a trusted source.

5. Falling Prey to Scams

Seniors are particularly vulnerable to scam artists. Successful con artists sound and look extremely professional, credible and respectable. Don't allow yourself to become a victim because you don't want to appear rude. Always investigate strangers who have deals that seem too good to be true and beware of anyone who suggests putting your money into something you do not understand.