This article is all about financial regrets, or simply, things people wish they did (or maybe didn’t do) with their personal finances. Most people deal with some sort of regret in life, whether it is not saving enough money for retirement, college or vacation, or maybe spending too much time at work and not enough time with the family. We all at some point wish we did something differently in our past. The same concept applies to money and there are a number of different reasons people have financial regret and it’s not just splurge spending. Can you guess what the number one financial regret is in America today?
Before I give you the answer let me provide some background and statistics for you. Based on Bankrate’s May Financial Security Index, 76% of Americans have at least one financial regret. Further, 56% of the same surveyed individuals stated that their regret had to do with savings. People are just not saving like they used to and, to be honest, the numbers are just plain sad. At the end of 2018, 32% of Americans had $0 in their savings account and 26% had less than $1k. That is more than half the population with less than $1k in savings!
Unfortunately, there are a lot of things working against people of all ages trying to save. For example, students are graduating college with higher student loan bills, housing costs around the country are rising, and credit card debt is back to pre-2008 crisis levels. All of these things are making it harder and harder to save. And if you are parents of a student in college or recently graduated you may be helping your child pay off college or simply have higher grocery and living expense if your child has decided to move back. While Americans are faced with all of these challenges, wage growth in the US has remained relatively flat, and it definitely has not increased enough to keep pace with the rising cost of college and homes. The bottom line is that people aren’t saving for the future because they are using every penny they have to fight debt and the rising costs of education, homes, food, etc.
So, what is America’s number one financial regret? Not saving for retirement early enough. As shown in the table below, this was followed up with not saving enough for emergency expenses. America’s number one regret is important because all of those people who started saving for retirement later in life missed out on compound interest.
Compound interest alone can have a huge impact on the savings one accumulates for retirement. Without going into too much detail here, the simple and short answer is the earlier you start saving, the quicker that money grows, and the longer the time period you have to save the better. This is especially true now as the savings and CD rates around the country are finally starting to rise. For example, there high yield online savings account paying an interest rate of 2.25% or higher which is significantly better than it was 5 or 10 years ago. Younger generations starting to save for retirement today should really take advantage of the increased savings and deposit rates.
So how do you do this? There is no simple answer or an answer that works for everyone. The simple truth is that you need to look and analyze your expenses for a month or two and see where you are spending money. You should try to identify trends or patterns where money is being spent on things you want, but don’t actually need. For example, you get a $5 latte from the coffee shop down the street every week day on the way to work. Do you really need that coffee or can you go to McDonald’s and pick up the $1 coffee on the way to work? If you don’t mind the McDonald’s coffee you just saved yourself $20 a week and guess where that can go? Right into your savings account. If you keep performing this same exercise each month with different cost you can slowly build your savings.
