The 3 Most Common Money Regrets

When planning for a major change in your life, it’s often helpful to talk to people who have successfully navigated unfamiliar waters. These people can share their success stories, and you can learn a lot from them. On the other hand, sometimes we learn just as much from others’ regrets. Sometimes, having a “what not to do” list is just as important as having a “to do” list!

A 2012 study uncovered the price of financial planning regret. In the survey of middle-class Americans, about two-thirds of respondents reported making at least one “really bad” financial decision at some point in their lives. Unfortunately, these bad decisions weren’t shoes that didn’t fit well or even a vacation that didn’t go as planned. The average price tag on these bad decisions amounted to 23,000 dollars. That’s not small change for most of us, and it’s a hefty price to pay for one poor decision.

So what type of bad decisions lead to money regret?

Credit card abuse. Most of us have made an impulse purchase at some point, and then later regretted it. For many American households, the reality is a series of impulse purchases, multiplied by high interest rates. Before long, you realize you’re spending money on basically nothing, and debt becomes a huge drag on your finances.

Poor investment choices. When you lose your entire capital on an investment, that’s a very obvious and devastating loss. However, even investments which don’t grow as expected negatively impact your financial future. You’ve now lost time during which that money could have been better invested somewhere else, and that can mean thousands of dollars down the drain.

Unaffordable mortgages. We saw a lot of this during the recent housing market bust. Many homeowners took on mortgages they really could not afford, and the resulting foreclosures impacted not only their futures but our economy as a whole. Remember that even if a mortgage broker tells you a loan is affordable, you are the only one who can really make that decision.

The world of finance changes constantly, and there are few investing decisions that are right for everyone. Analyze your objectives carefully, consider your risk tolerance, and do your research. Above all else, formulate a solid plan with your retirement professional, and revisit that plan every few years to be sure it still suits your goals for the future.

Source: Middle -Income Americans Wing It On Financial Decisions, Investment News September 18, 2012.