No matter what your long-term financial goals are, there are some financial decisions you will come to regret. Fortunately, you can head these decisions off now that you’re reading this.
As you make your daily, monthly, and annual financial decisions, be sure to avoid making these incredibly regrettable choices. In ten years, you’ll thank yourself.
Failing to save enough money
Many people don’t realize the value of putting money in savings until it’s too late. There are several excellent reasons to put as much money into savings as possible.
First, you’ll need money to cover emergencies and other unexpected expenses. If you ever have a job loss or reduction in household income, savings can help supplement the income loss until you’ve replaced it. Savings can be used for a down payment on a home or car, to pay for a child’s college tuition, or even to start a new business.
Buying a house before you’re ready
For years, owning a home has been an essential part of the American Dream. But, rushing to make that dream come true can turn into a nightmare, particularly if you have to take out a mortgage for your dream home.
A mortgage is a major long-term obligation. With homeownership, you’re also responsible for property taxes, insurance, and home maintenance and repairs. Buying a home before you’re ready can derail your financial progress and delay some of your other financial goals. Make sure you’re following sound advice when looking to buy a home, and not acting on impulse.
Not building a good credit score
Credit scores are a numerical representation of the information in your credit report. The three-digit number measures the likelihood that you’ll default on a new credit or loan obligation. Many businesses – creditors, lenders, and other businesses – use credit scores to decide whether or not to approve your application and to set the price they’ll charge when they do approve your application.
Waiting too long to start building your credit means you’ll often have trouble getting approved. When you are approved, you may have to pay a higher interest rate or security deposits. Once you build your credit score, the lender’s requirements will be a more lenient.
Waiting too long to start investing
Investing can seem intimidating, but once you understand how investing works, you’ll be upset with yourself for not getting started earlier. When you start investing earlier, your money has more time to grow.
You can build up much more money over a longer period of time by starting earlier rather than waiting for some point in the future. Not only that, when you’re younger and have fewer family and financial obligations, you have much more flexibility in how you spend your money. That is one of the best times to get started investing.
Not getting health insurance
Forgoing health insurance may sound like a good way to minimize your expenses and keep more money for yourself. However, not having health coverage is risky, even if you’re healthy.
You could have an accident or fall ill at any point, without warning. Without health insurance, you’re financially responsible for all your medical bills. If you can’t afford to pay medical bills, it could push you into bankruptcy. Medical debt is one of the biggest causes of bankruptcy in the United States and it often stems from a lack of health coverage.
Even if you get hurt at work, disability will not take care of everything, and often, it’s an incredibly hard process to navigate. Most people need a lawyer to get through the Social Security disability process.
Don’t get caught with your pants down trying skating by without medical care. Your future self may come to regret it.
Carrying high interest rate debt
If you don’t get rid of your high interest rate debt now, ten years down the road, you’ll look back with much regret over the amount of money you wasted on interest payments. It’s money that you can’t get back, that you could have spent on something far more beneficial.
Focus on getting rid of high interest rate debts now, even if you have to make some sacrifices. The money you save on interest and finances charges will be far more productive being invested or saved.
Not diversifying your investments
The idiom “Don’t put all your eggs in one basket” is perfect to describe why you should diversify your investments. Diversifying means you’re investing your money in different places to hedge against risk.
That way, if one investment drops in value, the money in other investments will keep you from suffering a total loss. Diversifying is about more than putting money in different stocks. You should also invest in other types of securities and accounts.
Not Diversifying Your Career Skills
The workforce is changing. Automation is eating up administrivia, and some people are left jobless. You’re out of your mind if you think what you do with your career is not a financial decision.
Everyone wants to “do what they love,” but very few people love what they do. They do it for money, plain and simple. Apart from the obvious ones, automation software is already taking hold of marketers, project managers, IT professionals, AP clerks, and the list goes on. It’s taking aim at more careers too.
If you want to stay employable, start embracing technology, and getting used to managing it. You should also be familiar with whatever higher-level tasks are available in your career vertical. This will be a huge help down the line.
Living above your means
Spending more money than you make will quickly lead to financial disaster. There are only two ways to fund this lifestyle – either by dipping into savings or by creating additional debt – and they’re both disastrous.
You can ensure you’re living within your means by using a budget to plan your spending. Reduce your expenses so they fit within your income rather than stretching your spending outside of what you can afford.
Loaning money to friends or relatives
Most of us want to help a loved one who’s in a tough spot, but too often, these situations backfire. Loaning money to a friend or relative turns your relationship from personal to business.
If they can’t afford to pay you back, it can put a strain on your relationship and possibly even end it for good. That’s not to suggest you can’t help out, but considering your help a gift rather than a loan can keep your relationship from falling apart.
Not educating yourself on personal finance
It’s your job to learn as much about personal finance as you can so you can work toward a secure financial future. There’s a wealth of free information available on the internet. You can also check out books from the library or purchase books if you prefer to own them.
Investing in your own personal finance education will prove to be invaluable when you look back 10 years from now.