Like most people, you have probably made some not so great money choices and have financial regrets around certain things you shouldn't have done or wish you never did with your money.
However, when it comes to money mistakes and regrets, it's important to recognize what you are doing wrong as early possible and then make the changes necessary to address the situation before it comes too late and what better way to get started than learning from the mistakes of others?
"When it comes to money mistakes and regrets, it's important to recognize what you are doing wrong as early possible and then make the changes necessary to address the situation."
I'll be talking through some of the most common financial mistakes and regrets that people have made and what you should be doing to avoid them but first let's clarify the difference between a bad financial decision vs. a financial regret.
A bad financial decision is when you make a money choice that in retrospect you realize was not a good idea but you have time to correct things and make changes so it doesn't impact your finances too negatively over the long term.
A financial regret is when you've made those bad financial decisions but unfortunately it's too late to fully recover from it's impact on your long term finances.
Now that we are clear on the difference let's start with going over the worst financial decisions people make:
The worst financial decisions people make
The top 3 worst financial decisions people have made are:
1. Not saving enough money (23%)
A whooping 23% of people admit that not saving enough money is their worst financial decision. I definitely see how this can happen especially if you don't pay yourself first before you start spending your paycheck or if you don't plan out your finances well enough or if you struggle to budget.
2. Living large in your 20's (14%)
Yes your glorious 20s. In your 20s is when you really become an independent adult; You graduate from college, you get your first big pay check, maybe you move out on your own...and now you can do things that you really couldn't do way back when you really didn't make any money. You also very likely don't have as many financial burdens as say someone in their 30s or 40s so it's easy to put savings on the back burner while you enjoy those glorious twenties.
3. Racking up debt on unnecessary purchases (14%)
Those store card, credit card and car loan specials can be very enticing, alluring you with discounts and minimal interest rates but once things start to add up and those introductory rates disappear, your debt can become a nightmare.
How to avoid these 3 worst financial decisions
1. Save 10% of your income
Set a goal to save at least 10% of your income each time you get paid no matter what. Make it easier on yourself by automating the deposits to your savings accounts - basically, set it and forget it. Also be sure to categorize your savings e.g. retirement savings, emergency savings and other short term, mid term and long term goals.
2. Master the art of budgeting
It can take time to learn how to budget well but make it a goal to create a budget in advance of each month and work on sticking to it as best as you can. Practice makes perfect! Need some help on how to budget? Click HERE.
3. Avoid debt, pay it off quickly
Debt sucks and there's no two ways about it. A priority of yours should be to pay off any debt (especially high interest debt) that you have as quickly as possible and avoid taking on new debt. Need some help with creating a debt repayment strategy? Check out this blog post HERE.
Next let's get into the biggest financial regrets that people have:
The biggest financial regrets people have
The top 3 biggest regrets that people have are:
Not being able to purchase a home (29%)
Owning a home is a dream for many but sometimes it gets put off as something to consider later or because of poor credit or the lack of funds when it comes to putting down a deposit. While owning a home can be a great idea, you have to make sure it makes sense for your personal life and financial situation.
How to avoid this regret: That being said, if buying a home is something you'd like to do here are a few tips:
- Build your home downpayment savings into your budget
- Prioritize getting your credit in order - click HERE to read my post on rebuilding credit
- Determine exactly where you'd like to purchase (and live) long term - Check out THIS blog post on the 3 questions you should be asking yourself if you think you are ready to buy a house.
Not being able to take that trip of a life time (29%)
Many people have dreams of being able to travel the world and that dream usually goes alongside the dream of retiring early or being able to work a job or have a lifestyle that gives them the flexibility to get up and go whenever they'd like. It also ties into spending time with loved ones.
Unfortunately, so many people never get to live out those dreams because of their financial burdens and other life obligations and as time passes the dream of being able to take those dream trips fizzles out.
How to avoid this regret: Plan for it as early as you can! Open up a travel savings account, max out your retirement and non-retirement contributions and keep your goal at the top of your mind. This way you have a constant reminder of what it is you are trying to accomplish and if you find yourself getting distracted you can find a way to get back on track.
Never starting that business (23%)
Ever had a business idea that you thought could get you out of your 9 to 5? What did you do about it? So many people have incredible business ideas that they never pursue at all and usually it's because they can't afford to give up their job security and consistent pay check to start a business due to their financial obligations.
The early stages of starting a business can be really tough. Earning little or no income to start, working long hours, the stress of wanting your business to succeed and figuring things out etc are just a few of the things new business owners experience but that doesn't mean you should give up on your idea.
How to avoid this regret: Create a plan and start small. Your business can be your side hustle while you prove your concept or until you get to the point where you can transition into it full time. Yes, being a business owner is hard work, but it's totally doable and you can be successful at it with a solid strategy. Check out the 7 things I did before I quit my job to become a full time business owner HERE.
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What have been your biggest financial regrets? What lessons did you learn? What are you doing differently? Please share in the comments!
Bola Onada Sokunbi
** The data in the post is based on a survey of 2000 Americans done my Claris Finance. See full survey here **