Financial mistakes are easy to make and hard to undo. That’s why it’s important to put careful thought into the decisions you make. Bad financial decisions not only lead to major regret, they can make your life more expensive. Here are seven financial decisions you’re sure to regret.
Not paying off your debt before retirement. Going into retirement, you want to have as few monthly expenses as possible – the lower your monthly expenses, the easier it is to survive on your monthly income. Maybe you can manage your debt payments during retirement, but you’ll experience much greater financial freedom if you don’t have to. It can be tough to balance debt payments and retirement savings, but balancing the two is better than neglecting one for the other.
Not saving enough for retirement. What’s worse than not paying off your debt before you retire, is not saving up enough money to maintain a comfortable standard of living. Multiply your desired annual retirement income by 25 to estimate the amount you need to have saved by the time you retire. Max out your retirement savings and take advantage of any employer matching programs your job offers.
Not refinancing while interest rates are low. If you purchased a house or car when interest rates were high or when you didn’t have the best credit, your payments are probably high. When interest rates drop and your credit score improves, it’s a great time to refinance your loan for a better rate and lower payment. You’ll save money and possibly pay off your loan faster.
Not having enough taxes withheld. Some people adjust their tax withholding to have more money in their paychecks, but it only takes one time to see how this can backfire. If you don’t have enough taxes withheld from your pay, you can end up with a tax bill instead of a refund at tax season. Having to fork over several thousand dollars to the IRS – all at once – is incentive to take a second look at your tax withholding.
Spending money for the wrong reasons. You will always regret buying things to impress other people, to make the wrong people happy, or out of fear of being left out. Make sure your spending decisions based on your own goals and values, not those of others. You’ll be much happier with the decisions you’ve made.
Spending instead of building an emergency fund. Thankfully, financial emergencies don’t happen often, but that can make you feel complacent about not having an emergency fund. You don’t want to learn the hard way – like losing your job without having any money in savings – how essential it is to have some money set aside for a rainy day.
Ignoring your credit. Your credit plays a major role in your life and more businesses are turning to your credit history to make decisions about you. Most people know that banks use credit to approve credit card and loan applications. Cell phone companies, utility service providers, and even employers use your credit to make decisions about you. Check your credit periodically to see how you’re doing. Paying your bills on time and borrowing only what you can afford are the best things you can do for your credit score.
The money decisions you make today are preparing you for the future. Be careful that you don’t make financial decisions you’ll regret.