In a NutshellWhether you're a financial newbie or expert, everyone is susceptible to making financial mistakes, which can result in financial regrets. However, you can learn a powerful lesson from them and improve your financial future.
“I wish I would have saved more.”
“I wish I started investing sooner.”
“I wish I didn’t take out so many student loans.”
Do any of these sound familiar? If you’re like me, you may have more than a few financial regrets from your past. But everyone makes financial mistakes at some point. We asked some top money experts to share their biggest financial regret, and here’s what they had to say.
Regret #1: Not doing research to make an educated decision
When it comes to you and your money, there’s no greater advocate than yourself. However, money matters can seem complicated, so you may decide to get help from others, expecting that they have your best interest at heart. Unfortunately, this may not be the case.
Philip Taylor, certified public accountant and founder of PT Money, experienced this firsthand when he and his wife decided to purchase their first home together.
“We used a realtor for the negotiation. We ended up paying too much compared to other offers in the neighborhood, and it was at the peak of the housing bubble, which compounded things,” he says.
What Taylor has learned since then is that you have to be your own financial expert and do your own research to make an educated decision when it comes to big purchases.
“One big regret I have is assuming anyone other than me can act in my best interest financially,” Taylor says.
Regret #2: Not listening to your gut when things don’t feel right
Investing is one of the most important ways you can build wealth and grow your nest egg. When you want advice, you may turn to an investment adviser to get on the right track.
But not all advisers are created equal.
“One money mistake I made was not listening to my gut when my husband and I were meeting with our first investment adviser,” says Amanda Clayman, a financial social worker and financial therapist in New York City.
Clayman ignored her gut, while the adviser made bold promises of growing their accounts into millions of dollars.
“This was a person who did not have a fiduciary responsibility to us, and would use our meetings as a forum to parade salespeople for in-house funds, trying to convince us to invest in them,” she says.
After feeling disempowered and researching other advisers, she eventually stopped working with this adviser and moved her money elsewhere.
“Now I make sure I understand the exact nature of our client agreement, the investment strategy, any fees we’re paying and what we’re invested in,” she explains.
Regret #3: Not investing sooner
When you’re young, it’s easy to feel like you have all the time in the world to start saving and investing. Then before you know it, you’re 30 — then 40 and beyond. Life happens, and it moves quickly.
“My biggest financial regret is not investing earlier,” says Jeff Rose, Certified Financial Planner™ at Alliance Wealth Management LLC and blogger behind GoodFinancialCents.com.
When he was young, a friend told Rose about the benefits of opening a Roth IRA, but he thought he could just save later. At the time, Jeff was in college and working 20 to 30 hours per week, but he still didn’t invest.
“I’m thankful that I discovered a career in the financial services industry — it inspired me to start a Roth IRA when I was 24 years old. But I still kick myself thinking about how much more I would have saved if I’d started six years prior,” he says.
Not investing sooner is a common financial regret and one that Ebong Eka, coach and certified public accountant behind EKAnomics, shares with Rose.
When you’re young, it’s easy to feel like you can’t afford investing, but Eka says everything adds up. “Every little bit counts, and I could have easily afforded $20 per month in an IRA or retirement account,” he says.
Eka recommends you start thinking of the end — in this case, retirement — and work backward to make it happen.
Regret #4: Living beyond your means and getting into debt
When you get out of school and land your first real job, it can be easy to let lifestyle inflation take over and start justifying all kinds of purchases. However, keeping up with that habit can quickly lead to credit card debt.
Nicole Lapin, author of “Rich Bitch,” did just that and ended up with $5,000 of credit card debt. After landing her dream gig at CNN, she splurged on a new wardrobe and got a two-bedroom apartment all for herself, which included new furniture as well.
All of these purchases put Lapin into debt, which was new territory for her. She says, “Finding myself in debt for the first time in my life kept me up at night, and I resolved to start the new year afresh and debt-free,” she says.
To help with this, she recommends automating your credit card payments and paying down debt as quickly as you can.
Regret #5: Ignoring a collection item
It’s easy to get into debt — and much harder to actually get out of it. Unfortunately, ignoring your financial commitments can hurt your credit and lead to unintended consequences.
Founder of personal finance blog My Fab Finance, Tonya Rapley regrets ignoring an account in collections. Eventually, the collections item went to court and resulted in a judgment on her credit report.
“I was young and careless, and my wages were (garnished) for two years,” she says. She also paid an additional $300 to $500 in fees.
Eventually, Rapley was able to improve her credit score and now works as a financial education instructor helping others. The downside? Despite improving her credit, the judgment still appears on her credit report (judgments can stay on your report for up to seven years.)
The lesson? Don’t ignore accounts in collections or your debt. Pay on time, and if you can’t, talk to your servicer about your options or at least pay the minimum.
Whether you’re a financial newbie or expert, everyone is susceptible to making financial mistakes, which can result in financial regrets. However, you can learn a powerful lesson from them and improve your financial future.