This time of year there are many things to be afraid of, but don’t let regret be one of those fears. When it comes to investing and financial planning there are many decisions to be made, and some of these decisions could wind up haunting you in the future. However, if you’re a millennial and part of the younger generation, you still have time to get ahead of these money mistakes so you can look back without regret.
When it comes to investing, there are two major money decisions that are sure to give you some nightmares down the road.
Doing nothing. Albert Einstein once said, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.” I think we all can agree that Albert was a very smart guy. Not starting to invest early enough is one of the biggest mistakes made by young adults. Time is our greatest ally in investing and waiting too long or not taking advantage of it is a mistake and you can’t get those years back.
Being too conservative when you’re young. Your personality may be conservative in the sense that you don’t want to run the risk of losing money, but that should be superseded by your circumstance in life. If you’re 24 and you have 41 years until retirement, regardless of how you feel about yourself as an investor, you should take advantage of the time you have to be aggressive.
When thinking about personal finance decisions there are quite a few spooky mistakes lurking in the shadows just waiting to take advantage of your wallet.
Lifestyle inflation. As many young adults begin making a larger income they fall victim to the trend of spending everything they make. My advice to young adults is, rather than spending more as you make more, learn to save more as you make more.
Letting debt get out of control. When you’re young, it’s not unreasonable or unexpected to have some debt, but letting it grow out of control, not managing it well, or not managing your spending to mitigate that debt may come back to haunt you.
Getting degrees on spec. We’ve been seeing this a lot more in recent years, specifically with post-graduate degrees. It’s become common for millennials to think that if they go back and get their MBA it will make them more marketable. Now, if you have identified a job or career you want that requires an MBA, by all means go and get it. However it’s not always a good idea to go into further debt and spend all your time, energy and money assuming it will pay off in the end.
Being pennywise and pound foolish. It is great to be a saver, cost-conscious and frugal to a certain degree. However, there are certain things worth spending money on. If you don’t they may come back to haunt you. Some things that are often worth paying a little more for are life, health and property/casualty insurance. For example, getting the state minimum car insurance will save money until you get into an accident. On the investment side, you could save money by not paying for good financial advice, but it could cost you in the future.
Waiting too long to get life insurance. For those who need it, the older you are the more you are likely to pay. Take advantage of your youth and your health now.
Not paying yourself first. Get in the habit early of saving, investing and paying off debt. Make it a discipline early on, because not only are you losing time, but it’s harder to develop good habits and break bad ones the longer you’re at it.
Avoid these money mistakes now and you’ll save yourself from the regrets that could haunt your future.