If you really want to be a financial success, that does not mean you will not go through financial regrets. Although you will learn a lot from your mistakes, it helps to take the steps that will prevent them.
Obviously, before you can prevent something, you need to know what they are first. Identifying the problem is usually the first step that will help you understand what you need to avoid in the future. It will help you make smart decisions about how you want to lay out your plans for your financial growth.
Signs that you have made a mistake in your financial life
The National Foundation for Credit Counseling released a press release that showed the top 5 financial regrets of consumers in general. In a 2012 survey answered by more than 2,200 consumers, they mentioned the following regrets that they wish they never made.
Not enough savings (18%)
Did not prepare for retirement (14%)
Not buying a home (10%)
Buying a home (5%)
Before you arrive at a point when you have to go through these regrets, there are signs that tell you there is something wrong with the way you are managing your money. It really depends on your specific situation but here are the signs that you have made a lot of mistakes in your financial life?
You have a lot of debts.
This is the top reason to go through all of the regrets mentioned above. Having a lot of debts is the main sign that you are doing something wrong. It means you are spending beyond what you are earning. If you do not correct your spending immediately, you will only put yourself further in debt and that will make it hard for you to invest in things that will increase your personal wealth.
You do not have adequate savings in your emergency fund.
Another sign that you are bound to have a lot of financial regrets is when you do not have enough emergency funds. This is actually a vicious cycle where starting from lack of funds, you need to borrow when an emergency comes banging down your door. You are now left with more loans than you can pay. Then another emergency will have the same outcome, digging you deeper into debt. It is best to be prepared for the rainy days with funds stashed away just in case you need it.
You are living from paycheck to paycheck.
Making ends meet is a softer term for living from payday to payday. This is one clear sign that you are going down the road to a financial crisis. This requires a lot of self-examination with the loans and expenses you have versus the income that you are bringing in. One way to address this is lower down your expenses and try to look for ways to increase your income. Living between paychecks is a fragile situation that one wrong move would bring you to debt very quickly.
You borrow money to pay for debts that are about to be due.
This is one classic case of financial mismanagement. There are healthy debts or loans. They become toxic for a lot of reasons and one of them is if we are unable to pay them with our own income. If borrowing money just to meet payment deadlines is becoming more of the norm rather than the exception, being debt free will be a far dream. Learn to manage the payments with your income wisely to steer clear of these scenarios.
Common financial mistakes of college students
Admittedly, college students would not have much appreciation of personal finance at their age. Case in point is a Newyorkfed.org research stating the fact that from Q2 to Q3 of 2013, credit reports of balances from student loans jumped to over $1T from just $33B. That is a glaring example of how little financial literacy college students have over their personal borrowing and repayment methods.
An article on Credit.com gives more statistics on how college students consume the credit industry. It explains how undergraduates who carry a minimum of one credit card increased to 91% from 76% in 2004. It also explains that the average debt an undergrad has with the card is at over $3,000 and on graduation day, it could go up to over $4,000.
Some of the more common financial mistakes college students make are:
Second-guessing Scholarships. Not utilizing this will cost you a lot of money. Scholarships are out there for those who work hard for them. It is not enough to apply for a few and cross every finger in your body hoping for an approval. Getting one is quite hard as the screening process is a bit too strict. There will be a lot of rejections when you apply for scholarships so the trick is to apply to a whole lot more than the amount of rejection letter you get.
Course vs. Job Prospects. It is a fine line in deciding how to pursue your dream of taking a field that has a higher rate of job placement. College students put more weight into pursuing their likes when in fact, it can be balanced with what the job demands are after college. While you want to work on something that you are passionate about, make sure that it will help you pay the bills.
On The Job. College life is quite financially demanding and some of them cannot be covered by loans and your parents. Getting a job is seen to be a good option for some students that need to get through cash heavy purchases such as parking, food and even for coffee.
Money regrets you do not want to bring to your retirement
Retirees have gone through a lot and there a lot of wisdom we can learn from them. From knowing top issues to resolve in planning retirement to even explore debt relief options for retirees, they have been there and done that. Some of the more common regrets they have we want to address early on are:
Not saving for retirement. Most of the retirees regret not paying much attention to their pension after employment. Most of them thought that the paycheck will just keep on coming in. Most of them would like to get a second chance in building up their 401(k).
Health for Money. A lot of them prioritized money over their health so much that they are now hoping for a second chance. They would have paid more attention to their health and the money second. Health is an investment that is worth prioritizing over that pitch or brand campaign.
Letting go of yourself. As some of them started a family, they stopped investing in themselves. As soon as the youngest child goes off to college, they are left with nothing to do. It is great to continue with self-growth even while raising a family.
Settling for a house. Some of them regret settling for a cheap house and investing on the repairs. Most of the houses sold cheap are in neighborhoods that might or might not improve and the cost of the repairs are just not worth it.
There is wisdom found in retirees because they have undergone some of the most challenging financial situations. Some of them were able to hurdle over it and some of them are still paying the price for wrong decisions. Whatever it is, we need to learn from their experiences so we may have less financial regrets in life. We will still make mistakes because that is one great way of learning. The idea is to bounce back and learn from them.