Carl Richards knows a thing or two about making money mistakes. He isn’t afraid to discuss the missteps that led him to lose his house in 2010.
It’s been 6 years since the financial markets hit bottom, but Americans still make similar mistakes, says Richards, who is known as the “Sketch Guy” for his sketches on financial topics in The New York Times.
“We’ve forgotten what risk is again,” he says. “We’re starting to take the recent past and project it indefinitely into the future.” He recently heard someone say, “I can buy a Hummer now, because gas prices are so low.” Of course, gas prices will rise.
To avoid these mistakes, you should “go back and remember what it felt like to have made a decision when you bought high only to be forced to sell low later,” Richards advises. Then, you should create a plan.
That’s the focus of Richards’ new book, “The One-Page Financial Plan,” which was published in March 2015. “You build a plan based on your unique values and goals,” he says. “Most people never take the time to figure that out.”
Richards’ own plan includes saving for retirement and a new home. For retirement, he has 80 percent invested in stocks and 20 percent in bonds. Richards has his home savings in cash and short-term certificates of deposit but didn’t provide percentages.