By Andrew Housser
When people look back on their lives, most wish they had done something differently. This is especially true when it comes to money. A recent survey of U.S. consumers found that only 20 percent said they had no financial regrets. The other 80 percent wish they had saved more, stayed out of debt, gone to college (to help earn more) or bought a house earlier in life.
The annual International Forgiveness Day – coming up on Aug. 6 – offers a prime opportunity to take concrete action on any financial regrets. If you are among that 80 percent who regret some financial decisions and actions, it is a good time to forgive yourself and move on. Here are four suggestions to get started.
Evaluate the finances of higher education for yourself and your children. Twenty percent of people said their greatest regret was not saving enough for college for themselves or their children. If you did not go to college and wish you had, evaluate whether it would make sense to further your education now. A college degree often will help you earn more in the long run, as long as you avoid excessive debt in the process. If you pursue this option, check into financial aid – and do everything you can to live within your means while you pay for your education. If trying to save for your children’s education, eliminate any credit card, student loan, or other unsecured debt first. Also make sure you are saving for your own retirement.
Realize it’s never too late to save for retirement. Even if you are certain you cannot save enough at this point, it is still worthwhile to save what you can. A general rule of thumb is to save at least 15 percent of your income with each paycheck. Save more if you can, no matter what your age. Max out investments to employer-sponsored plans, especially if plans match part or all of your contribution. After age 50, take advantage of “catch-up” contribution rules that allow people to save even more. Meanwhile, focus on living within your means and eliminating debt.
Make a plan for home ownership. Not being able to buy a home is a major money regret for nearly 30 percent of people. If you share that regret, evaluate ways to make home ownership feasible. Understand, though, that it is a lofty goal today. Home prices have increased by more than 7 percent in the past year, according to Zillow. With the median price of homes for sale in the United States more than $250,000, would-be buyers need a down payment of $50,000 or more to buy a home without private mortgage insurance. In addition, a prospective homeowner will need steady income, a solid credit history, and the ability to pay the mortgage, insurance, maintenance and associated costs.
To achieve the goal of buying a home, work to improve your credit profile and scores. Check online calculators or talk with a mortgage lender to understand what you can afford. Make sure you have an emergency fund to cover unexpected expenses, and create a budget to help you save.
Eliminate debt once and for all. One survey found that debt plays a role in 3 of the top 10 money-related regrets. If it is one of your regrets, analyze why you are in debt. Do you have a realistic view of your income and expenses? Are you casually spending on things you could do without? Or did you experience a major medical event or other one-time, unavoidable cost? Understanding the root cause can help you plan for, and avoid, debt going forward. Then make a plan to repay your debt. That plan might need to include finding sources of extra income, cooking at home instead of eating out, or other cost-costing measures. If you are looking to lower the total cost of debt while simplifying payments, a personal loan may help. If you are struggling to make even minimum payments on credit card debt, debt negotiation (settlement) could reduce the total amount you must repay. Whatever you choose, focus on the solution, not on past failings.
The first step in dealing with a financial regret can be to forgive yourself. The second step is to take action. While you cannot change the past, you can resolve to change the future.
|Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.|