December is a time for reflection and resolution, and there’s no better source of knowledge than personal experience. This year, I asked five people approaching retirement a specific question about their financial regrets:
“If you could change anything about money management in your life, what would it be?”
Interestingly, none of them had the same thought, but all answered my question right away. Read on to learn how to apply their lessons in your own life.
- “I wish I’d learned about investing. I relied too much on a financial planner’s opinion and it cost me a third of my retirement.” Hiring a financial planner is necessary, but it isn’t the only factor of long-term savings. It’s impossible to manage your money without understanding the basic principles of investing. Review the facts before scheduling a retirement savings appointment. Prepare yourself for a productive conversation.
- “I wish I’d realized the value of money. I think of all the cash I spent in my 20s and how much it would be worth today.” This regret is high on the list for many Americans. It’s disheartening to realize that $5 a day could yield more than $633,000 over 40 years. Don’t discount the value of time and compounding interest. Prioritize savings by budgeting and cutting unnecessary expenses.
- “I should have gone to college. Manufacturing is risky. I never got paid much and my job was always three months from a layoff.” Earning an education is challenging, especially when the price tag is high. We’ve talked about the downside of student loans, but studies show that college graduates earn $2.7 million more during their lifetimes than their non-graduate counterparts. Consider your career goals and weigh the cost of loans against your earning potential.
- “I never should have used credit like a bank account. It took me years to crawl out from under the debt.” Credit is a tool, not a crutch. Just as this individual learned, mismanagement can lead to overwhelming debt, a consequence that can take years to fix. Remind yourself of credit utilization and use your cards for specific purchases only. Pay your balances at the end of each month to avoid accruing interest. The bottom line: Use credit wisely.
- “I shouldn’t have allowed my ex-husband to handle all the finances. I was completely lost—unprepared—when my marriage ended.” Marital roles are subjective, but it’s important to understand the family finances as a couple rather than a leader and follower. Regardless of your involvement in bill payment, be sure to understand your household’s debts, assets, savings and limits. The future is uncertain; don’t allow yourself to live in the dark.