Mistake #1: Thinking "diversification" in your investments and savings plans means having a mix of stocks, funds and equities (such as small cap, large cap and international), bonds and maybe some real estate.

For most people, this is what constitutes "diversification." But how much control do you REALLY have over your financial future, when most of your assets are in these types of vehicles?

The day after the stock market took its biggest single-day plunge since the 9/11 attacks, I got an interesting email from a subscriber to my newsletter, in response to my asking him if his financial plan was working.

He replied, "It was until yesterday."

Here's a news flash for you ? if your financial plan is affected by things that are totally out of your control, like the Chinese government deciding its economy is growing too fast, a terrorist attack where the Vice President is, or a computer glitch at Dow Jones (all factors that contributed to the steep drop)?

You don't HAVE a financial plan!

If your financial picture is affected (or you lose a wink of sleep), because major mortgage companies have a surge in defaults or are being investigated for a variety of misdeeds? or because housing starts fell? or because unemployment claims rose? or because the SEC filed criminal charges of conspiracy, fraud and bribery against Wall Street's best-known investment banks (these are all recent headlines affecting the market)?

You DON'T have a financial plan!

All you have is a hope and a prayer.

You may as well just plunk your nest-egg down on a gaming table in Vegas! You might at least have a few hours of fun.

The foundation of a solid financial plan, that will get you where you need to be, MUST include vehicles that will give you consistent and predictable growth.

Mistake #2: Thinking you'll come out ahead by postponing your taxes, when you save money in a tax-deferred retirement plan.

If you're like most people, the idea of postponing taxes is very attractive. But do you REALLY come out ahead when you do that? Let's look at the numbers, which reveal a surprisingly unexpected outcome?

If you were to put $4,000 a year into a traditional tax-deferred 401(k), IRA or pension plan for 24 years (for a total of $96,000), and earn 6% annually on it, you'd have $209,807. However, if you are in the 28% tax bracket, after paying taxes you'll end up with $151,061.

But, what happens if you put the same amount into a plan, where you pay taxes on your contributions in the year you make the contribution [such as a Roth IRA or Roth 401(k) plan], but you get to take your withdrawals tax-free?

After paying taxes on your $4,000 each year (assuming the same 28% tax bracket applies), your annual contribution would be $2,880. If you did this for 24 years, earning 6% annually as in the first scenario, you'd end up with... $151,061!

Whoa! That's the EXACT same amount!

However - and this is a BIG "however" - when you withdraw that $209,807 from a tax-deferred plan, as in the first scenario, you have to pay taxes on the ENTIRE $209,807 - the $96,000 you contributed AND the $113,807 of interest you earned.

But, when you put that same $96,000 into a plan after taxes (like the second scenario above), you only pay taxes on the $96,000 you contributed. You can get all the GROWTH earned in the plan, TAX-FREE, if you follow certain guidelines, according to current tax law.

Which would you rather do - pay the government 28% of $209,807 ($58,746)... or 28% of $96,000 ($26,880)?

That's a Whopping 118% More Tax!

Plus, most experts now predict taxes can only INCREASE, for a number of reasons, so you can expect your tax bite to be even bigger.

There are other legal and proven plans that give you the same advantages as Roth-type plans, plus MANY additional benefits, although your financial planner or CPA might not be aware of them.

Mistake #3: Depending on the government or an employer for your financial security.

With Social Security and Medicare headed toward bankruptcy, the government and most experts warning that we're going to have to work much longer, retire on much less, or BOTH, a pension crisis looming that could dash the retirement hopes of many? what CAN you count on?

According to Fortune Magazine (and many others), "You must be the captain of your own (financial) ship. You can no longer depend on the government or an employer to bail you out."

That means you need to bank on yourself? and nobody else.

Financial and retirement planning the "conventional wisdom" way clearly isn't working. You can stick your head in the sand and "pretend it ain't so," or you can change course and use proven strategies that DO work in today's economic environment.

Consider incorporating a strategy or vehicle into your financial plan that gives you ALL of the following benefits:

1. Your money grows each and EVERY year, no matter what happens in the stock or real estate markets, or the economy

2. Both your principal AND gains are locked in and you CAN'T go backwards

3. You can get access to your equity in the account or plan any time you want, with NO penalties for withdrawals or for taking too little or too much

4. You can borrow your equity in the account or plan, use it to invest in something else, or to buy something, and your money in the account continues growing as if you never touched a dime

5. The plan or account allows you to use your equity to become your own source of financing and bank on yourself, so you pocket the interest you'd otherwise pay to banks and financial institutions, plus it lets you recapture the ENTIRE purchase price of big-ticket items you purchase this way. [(c) 2007 Pamela Yellen]