Financial planning mistakes to avoid

Who among us has not made a costly financial blunder? Come on, admit it — we all make some dumb moves for which we have to pay a pretty penny.

Research by the Consumer Federation of America and Primerica found that two out of three Americans say they have made at least one "really bad financial decision," and almost half of those questioned — 47 percent — admitted that they had made more than one. The median cost of these bad decisions was $5,000, but the average cost was $23,000.

That we make financial boo-boos is not surprising, but the report also found that a large majority of those surveyed believe their ability to make financial decisions is "good" or "excellent," despite having made costly financial mistakes in the past.

"Considering their past mistakes and the complexity of the financial services marketplace, we were surprised at how highly most middle class Americans rate their ability to make a variety of financial decisions," said Stephen Brobeck, CFA executive director.

Call it the "Lake Wobegon Effect," named after the fictional town where author Garrison Keillor noted that "all the women are strong, all the men are good looking and all the children are above average." The Lake Wobegon Effect has come to mean the tendency to overestimate one's capabilities. In social psychology, it's called "illusory superiority."

Of course, if we are all so smart and confident in the world of finance, why are we shelling out thousands of dollars to cover our bad decisions? Even if you are from Lake Wobegon, you may be interested to know about these mistakes that I saw frequently when I was an investment adviser:

Hey, I've heard that even in Lake Wobegon, the average financial mistake can cost you $23,000!