If you’re like most Americans, you probably regret some of your financial decisions.
But before that, there is good news. Emmanuel K. Eliasson, president and CEO of Centennial, Colorado-based Eliasson Wealth Management, told MarketWatch that making money mistakes won’t end your path to financial freedom. It’s like a detour to your final destination, he said.
In fact, financial advisors say it’s normal to have regrets and make mistakes. “This is life,” says Erica Safran, financial planner and founder of New York City-based Saffron Wealth Advisors. “Just because it didn’t work doesn’t mean it wasn’t worth pursuing.”
Now, the bad news is that nearly 75% of Americans say they have some financial regrets, according to a survey released Wednesday. bank rate. Only one in five Americans said they had no financial regrets.
“Nearly 75% of Americans say they regret financially at least once.”
Of those surveyed by Bankrate, 21% said their biggest financial regret was not starting to save for retirement early. followed by heavy credit card debt (15%). Not saving enough for emergency expenses (14%). Have a large amount of student loan debt (5%). and not saving enough for their children’s education (3%). A significant number of respondents (18%) said they were unsure of what their biggest financial regret was, or that it was something else not listed above.
“Despite rising debt levels and rising interest rates, regrets about not saving still outweigh regrets about debt,” Greg McBride, chief financial analyst at Bankrate, said in a statement. The power of compounding can lead to “greater regret” for foregone savings over time, he added.
Here are three of people’s biggest financial regrets, identified by financial advisors.
1. Not saving enough early for retirement
Most financial advisers said their clients’ most common regret was not starting retirement savings early enough. “I tell them it’s never too late, but you have to start now,” said Angela Dorsey, founder and financial planner of Torrance, Calif.-based Dorsey Wealth Management.
Josh St. Laurent, founder and CEO of Wealth in Yourself, based in South Lake Tahoe, Calif., said for many, the reason might be that they don’t know when or how to start saving for retirement, especially for those who haven’t made much money to begin with. Stigma surrounding financial literacy education, or lack thereof, is strong, he added.
Dorsey stresses the importance of “saving a little bit” of your 401(k) from each paycheck to those just starting out. With a 6.5% annual return, McBride says, $1 invested in a 401(k) in your 20s will be worth $17 by the time you retire.
“I wish I had saved more” excuses “are a wrap-up to cover for some rash and disappointing decisions,” said Jim White, a financial adviser at Great Oak Wealth Management, which has offices in Pennsylvania.
And people who drop out of their 401(k) before reaching age 59 and a half are “savings killers,” he added. Withdrawing money early may result in a 10% penalty. So keep that in mind before he decides to pull out of his 401(k) to buy his dream home, White added.
2. make black and white decisions about money
Scott A. Bishop, partner and managing director of Presidio Wealth Partners in Houston, said people are most likely to make mistakes when they’re making “either/or” or black-and-white decisions about money: when they want to go all-in or all-out. This is especially true when it comes to buying and selling stocks, he said. FOMO (fear of missing out) often arises when people try to time the stock market.
Instead of going all-in on certain investments and selling them all, he said, investors should reassess their allocations and rebalance their portfolios to reduce risk.
“My experience is that when someone ‘cash in full,’ they leave late,” Bishop said. And what is the final result? “They sell low and buy high, which is the exact opposite of wanting to make money in the market.
3. sign a loan on behalf of a friend
Of course, financial advisors make mistakes too. Colorado-based financial planner Eliasson said failing to do proper due diligence before signing a rental lease on behalf of his friend was one of his biggest financial regrets. He did it, but didn’t do enough research into his friend’s economic behavior. Eventually, the “friend” disappeared in the middle of the lease, leaving Eliasson to pick up the tab.
Be especially careful when signing loans on behalf of friends and loved ones, whether student loans or personal loans, Eliasson said. Before you take risks, consider the worst-case scenario and what the financial implications would be if it happened.
Eliasson recommends asking before co-guaranteeing a loan: What is your work history? What is your credit score? Do you have any other outstanding loans?
After all, taking a little time before making a big decision can be the difference between having big financial regrets or not. “I should have been more vigilant and proper checks rather than acting on my heart and feelings out of misplaced compassion without financial wisdom,” Eliasson said.
After all, emotions and economics are too often intertwined.
What financial mistakes have you made in the past or regret? please let us know Readerstories@marketwatch.com A reporter may contact you.
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