If you\u2019re like most Americans, you are probably regretting some of your financial decisions.\u00a0<\/p>\n
But first, the good news: Making money mistakes is not the end of one\u2019s journey to financial freedom, Emmanuel K. Eliason, president and CEO of Eliason Wealth Management based in Centennial, Colo., told MarketWatch. It\u2019s more like a detour to the final destination, he said.\u00a0<\/p>\n
In fact, financial advisers said that having regrets \u2014 or making mistakes \u2014 is normal. \u201cThis is what life is,\u201d said Erika Safran, financial planner and founder of Safran Wealth Advisors based in New York City.\u00a0 \u201cJust because it didn\u2019t work out, doesn\u2019t mean it wasn\u2019t worth pursuing.\u201d<\/p>\n
Now for the bad news: Nearly 75% of Americans say they have some sort of financial regrets, according to a survey released Wednesday from Bankrate. Only one in five Americans said they didn\u2019t have any financial regret at all.<\/p>\n
\n \u201c<\/span>Nearly 75% of Americans say they have at least one financial regret.\u201d<\/span>\n <\/p>\n<\/p><\/div>\n<\/p><\/div>\n Of those asked by Bankrate, 21% said not starting to save for retirement early enough is their top financial regret. That was followed by taking on too much credit-card debt (15%); not saving enough for emergency expenses (14%); taking on too much student-loan debt (5%); and not saving enough for their children\u2019s education (3%). A significant number of respondents \u2014 18% \u2014 said they didn\u2019t know what their biggest financial regret was, or that it was something else not listed above.\u00a0<\/p>\n \u201cDespite rising debt levels and higher interest rates, regrets over lack of savings continue to outpace regrets related to debt,\u201d Bankrate chief financial analyst Greg McBride said in a statement. The power of compounding interest rates has the potential to \u201cmagnify regrets\u201d about foregone savings over time, he added.\u00a0<\/p>\n Here are three of people\u2019s biggest financial regrets, as identified by financial advisers.\u00a0<\/p>\n Most financial advisers said their clients\u2019 most common regret is not starting to save for retirement early enough. \u201cI tell them that it is never too late, but they must start now,\u201d said Angela Dorsey, founder and financial planner of Dorsey Wealth Management based in Torrance, Calif.\u00a0<\/p>\n For many, the reason may be not knowing when or how to start saving for retirement \u2014 especially for those not making a lot of money to start with, said Josh St. Laurent, founder and CEO of Wealth In Yourself based in South Lake Tahoe, Calif. The stigma surrounding financial literacy education or lack thereof is powerful, he added.\u00a0<\/p>\n For those who just entered the workforce, Dorsey stresses the importance of \u201csaving even just a small amount\u201d in a 401(k) from each paycheck. If the annual return is at 6.5%, every dollar put in a 401(k) in your 20s becomes $17 by the time the person retires, McBride said.<\/p>\n The \u201cI should have saved more\u201d excuse is \u201ca catch-all to cover several ill-advised, regrettable decisions,\u201d said Jim White, a financial adviser at Great Oak Wealth Management, which has offices in Pennsylvania.\u00a0<\/p>\n And people withdrawing from a 401(k) before reaching the age of 59\u00bd are \u201csavings killers,\u201d he added. Pulling money out early can incur a 10% penalty fee. So keep that in mind before deciding to pull from your 401(k) to purchase your dream home, White added.\u00a0<\/p>\n People are most likely to make mistakes when they make \u201cbinary\u201d or black-and-white decisions about money \u2014 that they want to go all-in or all-out, said Scott A. Bishop, partner and managing director at Presidio Wealth Partners in Houston. This is especially true when it comes to buying and selling stocks, he said. When people try to time the stock market, they often have FOMO (fear of missing out).<\/p>\n Instead of going all-in for a specific investment and selling everything, take another look at your allocation and rebalance the portfolio for less risk, he said.\u00a0<\/p>\n \u201cIn my experience when someone goes \u2018all to cash\u2019, they get out late,\u201d Bishop said. And the end result? \u201cThey sell low and buy high, exactly the opposite of what you want to make money in the markets.<\/p>\n Of course, financial advisers make mistakes too. Not doing proper due diligence before signing a rental lease on behalf of a friend is one of the biggest financial regrets of Eliason, the Colorado-based financial planner, said. He did just that, but did not do enough research into his friend\u2019s financial behavior. The \u201cfriend\u201d eventually disappeared in the middle of the lease, and Eliason was left to pick up the tab.\u00a0<\/p>\n People should be extra mindful about signing a loan \u2014 whether it\u2019s a student loan or a personal loan \u2014 on behalf of friends or loved ones, Eliason said. Before taking the risk, consider the worst-case scenario and, if that happened, how that would impact your finances.\u00a0<\/p>\n Questions Eliason recommends asking before cosigning a loan: What\u2019s your employment history? What\u2019s your credit score? Do you have any other outstanding loans?\u00a0<\/p>\n In the end, taking a little time before making a big decision could be the difference between having big financial regrets \u2014 or not. \u201cI should have been more vigilant and done a proper check instead of simply leading with my heart and emotion out of misplaced compassion without financial wisdom,\u201d Eliason said.\u00a0<\/p>\n Emotion and finance, after all, too often go hand-in-hand.<\/p>\n1. Not saving early enough for retirement<\/strong><\/h2>\n
2. Making black-and-white money decisions <\/strong><\/h2>\n
3. Signing a loan on behalf of a friend<\/strong><\/h2>\n