What is your biggest mistake from 2017

Planning for Financial Freedom: The 5 Biggest Mistakes and the 5 Most Frequent Questions

Dealing with one's own finances and striving for financial freedom in general are not particularly popular among the general population in Germany, Austria and Switzerland. Fortunately, there are blogs like Meinefinanziellefreiheit.com or 110prozent.club that want to help people become financially independent and that have plenty of information to offer.

Often made mistakes when planning retirement and financial freedom that make the goal difficult to achieve. At the same time, many questions arise again and again and one could easily create a “best of questions collection”. Since I haven't done a field study myself, I'm happy that Henning will share his experience here. Hennig runs the blog 110prozent.club and, according to his own definition, is a retirement advisor. So he fights the mentioned errors every day and answers the frequently asked questions. Thank you for your willingness to write this guest article, Henning. But now I hope you enjoy reading!


As a retirement planner, I can in fact report on the most common mistakes when planning retirement or financial freedom:

Mistake # 1: Goals are not defined

The biggest and most common mistake in retirement planning is that the investor does not set a goal. A goal is extremely important in order to sit out difficult times, keep investing and stay on the ball. A goal here means to define an amount or a target horizon.

Example: You have defined a goal that is 10 years in the future. Now there is a financial market crisis 4 years after you invested. Without a goal, you will likely give up and become frustrated very quickly. If you know what you are saving for, you will continue because your attitude has changed and you can be goal-oriented.

Mistake # 2: Half-hearted Risk Assessment

Most financial service providers or even banks meet the legal requirements but determine the willingness to take risks more for the fulfillment of the requirements of the regulatory authorities and not for the investor.
A risk assessment should always include what would happen in the worst case (a crash). Or also: How long would it take until the invested capital is available again?

Mistake # 3: Start Saving Earlier and Younger

Many young people are starting to save much earlier today and are very well informed. Often the beginning is made directly after school or university.
But there are also those who always have an excuse not to save. You just don't start and don't get the "jump". Something else is always higher up on the list of priorities than asset accumulation.
Let go of the excuses and get started, no matter how small your savings rate may be!

Mistake # 4: Discipline

Discipline and perseverance are the guarantors of success for reaching your goals. And it is the same with saving. Why do you think 9 out of 10 millionaires got rich with real estate? Quite simply - real estate investments force you to be disciplined and persistent. A share or an ETF is quickly bought but also quickly sold again.

Mistake # 5: Emotions destroy capital

Many investors cannot separate their emotions from the development of the markets. The direct reaction to changes in the stock market often leads investors to wrong decisions.

More important than the fluctuations is your strategy, your goal, your plan and that you stick to it. Separate your emotions from your investments.
Here you can find out how it works!

In addition to these common mistakes - which readers of this article shouldn't make - I come across some questions in my everyday work that are repeated with great frequency. So nothing makes more sense than collecting these once and answering them! Here are the most common questions I get asked about stocks, real estate, and finance.

Question # 1: How much should I put aside?

That depends on your goals. You should write or have an investment plan written for you in which all your goals are set out with a time horizon and approximate amount. Then you grab a compound interest calculator (just google it) and calculate your savings rate.

Question # 2: What returns can I accept?

For stocks, I would expect 6-9% p.a. in the long term. For me personally, I always choose 7% and 0% for bonds as well as for overnight money accounts.

You should calculate real estate exactly. Excel or an expert can help you here.

Question # 3: What if I have no goal at all?

In all honesty, you haven't really searched yet. Listen inside and start listing which things you like and which you don't. Alex Fischer has an excellent method for this in his book.

Question # 4: Help - my goals are so high that I can't even reach them!

You can achieve any goal. It's just a matter of commitment and time. If you only spend 15 minutes a day, you will eventually reach your goal. If you can spend 30 minutes, it is of course twice as fast!

Question # 5: How much can an investment cost me?

Active funds have very high costs. Both once and continuously. ETFs / index funds usually have no one-off fees and the running costs are very low. In general, all alarm bells should go off with you if more than 1.5% of the annual costs are incurred.

These 1.5% p.a. ongoing fees alone will cost you € 38,851 over 10 years! A lot of money that you could also use for your financial freedom. This cost effect can be seen very nicely in the following graphic. A system with no costs (red line) and an investment at 1.5% p.a. (blue line) are compared here.

Therefore: keep the costs as low as possible and only accept them to the smallest extent necessary!



To conclude, I would like to point out that banks are unlikely to have a genuine interest in your customers achieving their financial goals. When you talk to a retired banker today, it wasn't always like that. And this is exactly where the good reputation of a banker came from in the past. It has never been sold in such a product-oriented way as it is today. It was about the holistic solution of the customer problem. If necessary, the client's tax advisor, auditor, lawyer and notary was also involved. Today this is only arranged for very, very wealthy people.

Honesty, holism, partnership and the solution itself should always be in the foreground. If you always check these properties, you can also judge the quality of the proposed solutions.

The only thing left for me to do is to thank Henning for his guest contribution. The five mistakes mentioned should no longer happen to the readers of Meinefinanziellefreiheit.com and the answers to the five most frequently asked questions have now been answered collectively.

As always, I look forward to your comments! Can you think of any other errors or questions? What was your biggest mistake that you learned the most from?

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