We all have regrets – whether it’s to do with money or otherwise. But the one thing that holds true to financial mistakes is it can haunt you for the rest of your life. Selling a stock early or not re-negotiating your salary soon enough can you lead you to ask the question ‘why’ decades later.
A recent survey conducted on people approaching or in retirement found that the majority of people have the same financial regrets. Amongst them are not saving enough for retirement, not taking advantage of a business opportunity, not buying a house , rushing into a job, overthinking investing, habitual overspending, letting other people have control over you and letting others talk you out of great investments.
Here we look the 5 biggest financial regrets people have:
1) Not Saving Enough for Retirement – considering the people whom the survey was conducted on (pensioners or those nearing pension age), you would expect this to top the list.
Those that have already retired said that if they were given a chance, they would have done things differently. They would have saved more and given much more attention to where their savings and investments were going as opposed to just handing it over to some ‘financial planner.’
For those that are approaching retirement, they said that they would have loved to retire earlier but they did not have a proper financial plan during the first quarter of their working lives (25 – 35 yrs). Some of those surveyed stated that they would work into retirement age as they do not feel that their savings are sufficient to maintain their current lifestyle.
they did not plan ahead enough in advance .
How to avoid this from happening: Start saving early. But saving is not enough. Once you have enough money in cash savings to cover 7-8 months worth of expenses (rainy day funds), you need to start investing the money. You want your money to work for you. Start out by putting money into ISAs and SIPPS and watch your money grow through the power of compounding.
2) Not Taking Advantage of a Business Opportunity – Looking back, people said that they were too scarred to take that giant leap into entrepreneurship. Even though they had a great business idea which was guaranteed to work, they valued job security more than personal freedom. People in the survey stated that if they were to re-do things, they would take advantage of a business opportunity they saw.Particularly, they would do so in their early year, 20’s and 30’s, where mistakes are only lessons
How to avoid this from happening: If you are passionate about doing something, go out and do it. Don’t be too attached to the allure of job security. And by looking at this article , you might just have to become and entrepreneur if you want to succeed in the future.
3) Not buying a house – There are plenty reasons we might not want to buy a house. Maybe you just don’t have that kind of cash on hand. Maybe you want to wait until you have a family. Perhaps you don’t know where you want to settle down. But here’s the tricky thing about this particular regret: Unlike saving inadequately, which everyone would regret, not buying a home is actually the right move for many people.
How to avoid this from happening: The simple answer is buy a house. But this is proving tricky today as house prices have skyrocketed and left many would be first time buyers unable to climb the property ladder. You should only buy a house if it makes sense to you. If you can say yes to the following questions, then it could be the right move:
- Do you have enough saved up to not only make a down payment but also leave your emergency fund and retirement savings intact?
- In the area where you want to buy, is your price-to-rent ratio more in favor of buying?
- What is the trend in property prices in the area you are looking at?
- Do you plan to live in the house for at least five years, so you’ll be able to recoup your moving investment?
4) Being rushed into a job – This goes hand in hand with not taking advantage of a business opportunity above. Many people rush into the first job they find even if they don’t like it. And as the years go by, they feel unhappy in that job and just stay on because they can’t find a job elsewhere.
It is amazing that we spend almost 1/3 of our lives at a job and people are happy to spend this portion of their lives doing something they dislike. We need to change this way of thinking.
How to avoid this from happening: If you are already in a job you don’t like , I would say that you should put every effort into finding a new job. And don’t just ‘job hop’ because the pay is more. Do your due diligence to find out if that is the right job for you.
5) Overthinking Investing – Many people spend too much time and money overthinking investments. Whether this be opening a dozen brokerage accounts, trying to pick out individual stocks or attempting to do overly complicated transactions. The art of investing is not as complex as it sounds. If you do not want to waste your time analyzing various company reports and economic forecasts, index investing is the way for you to go.
How to avoid this from happening: It had been proven that the vast majority of people fail to consistently beat the market. So what should you do? Open an account with a low cost broken and buy a bunch of index funds. If you are too lazy to do this, that is not a problem. New services like Nutmeg construct and maintain your portfolio for you all for a minimal fee.