Learning about how to save and invest for retirement, your kid’s college education, and your next big goal is an important task for any individual. Jumping into the confusion of Roth IRAs, 401ks, and 529 plans without doing some research is a costly idea. But don’t learning and your desire to know everythign prevent you from action.
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This is one of the motto’s of our favorite personal finance bloggers, J.D. Roth of Get Rich Slowly. Striving for perfection seems like a great idea, but it can really backfire if it keeps you from action.
If you wait until you perfectly understand all of your potential investment options, you will never start investing.
The investing world is constantly changing. Your world and goals are not stagnant either. Trying to achieve perfection amid the chaos of the financial markets and your life will leave you frustrated and overwhelmed. Your emotions will get the best of you, and you will inevitably delay your decision to invest at all.
If you research college education investment options for five years, you will miss out on valuable years of growth.
Which is better: a state-sponsored 529 plan from the state you live in, a state-sponsored 529 plan from a different state, or an Educational Savings Account (ESA)? Each plan has its own perks. The plan in your current state may provide income tax deductions, but the expense costs to administer the plan may wipe out those deductions. A different state’s inexpensive 529 plan might be better. But at the end of the day the expense ratio and tax deduction amounts don’t matter if you never open an account and start investing.
Too many choices can lead to no choice being made. That’s contradictory to what we expect, but there is a popular study on selling jam in grocery stores that supports this line of thinking. The New York Times provided a great summary of too many choices leading to no choice being made.
There are too many choices within each financial category for you to have a perfect understanding of them. Large investment firms have teams dedicated to understanding what is going on in specific market niches, so you shouldn’t expect to understand everything about the whole market.
Instead of seeking perfection, use the follow strategy for financial success:
Are you holding off on making a financial decision? What is holding you back? Let’s talk about it…may be we can help.