Reposted from www.learnvest.com
What’s your biggest money regret?
A recent National Foundation for Credit Counseling (NFCC) online poll surveyed more than 2,200 people about their greatest financial regrets, and five financial actions–or inactions–topped the list.
· Habitually overspending
· Inadequately saving
· Buying a house
· Not buying a house
· Not saving enough for retirement
Frankly, what’s “regrettable” depends on whose life–and financial situation—we’re talking about: While buying a house could be the right move for one person, not buying a house could be better for another. When reading through these regrets and solutions, make sure to keep in mind what’s right for you in your situation.
1. Habitually Overspending
Most of us have felt the pang of guilt that accompanies overspending at one point of another. But what if you’re worried it’s become a habit–and you’re watching your money slip away? Everyone spends for different reasons, and the key to combating overspending is to identify why you spend. Do you have one of these spending triggers?
· The Emotional Spender: You buy because it makes you feel better when you’re down.
· The Compulsive Spender: Buying gives you a high, so you spend money all the time.
· The Absentminded Spender: You don’t pay attention to all the little things, so when you get your
credit card bill you have no idea how you spent so much.
· The Social Spender: You spend more when you’re with friends.
· The ‘It’s on Sale’ Spender: You can’t resist a sale, even if you don’t need (or particularly love) the item.
How to Keep It From Happening: Try these strategies to fight back:
· The Emotional Spender: Instead of retail therapy, address the real problem. Talk with a friend, write in your journal, visit your therapist and ask yourself if you’re buying because you need the item or because you think it will make you feel better about what’s really fueling your buying sprees.
· The Compulsive Spender: Find something else that makes you feel as good as spending money (preferably something free or inexpensive). Exercise? A creative activity? Volunteering? If you feel you need help recovering from a shopping addiction, visit a resource such as Shopaholic No More.
· The Absentminded Spender: For one month, stop using your cards, just use cash and track your spending. Allot yourself a certain amount per week, and see how little things add up. When you ease back onto cards, check your spending every day with our free Financial Inbox.
· The Social Spender: When approaching a social situation, think about what you really want from the experience—a $100 dinner tab that stretches your budget or quality time with your best friend?
· The ‘It’s on Sale’ Spender: You need the help of a more level head. Someone that can help you think through whether you really want the item, whether it is such a good deal or whether another similar deal is around the corner. Or, you can always use our Purchase Appraiser.
2. Inadequately Saving
It’s easy to let savings take a backseat to bills and–let’s be honest–the occasional night out. But a savings account is a lot like an umbrella: When you need it, you’ll be so glad it’s there. We recommend your emergency fund consist of the equivalent of at least six months of net income.
How to Keep It From Happening: To save effectively, you need to create a budget, keep track of your expenses, have a target savings goal and work toward it.
3. Not Buying a House
There are a lot of reasons we might not buy a house. Maybe you don’t know where you want to settle down. Maybe you want to wait until you have a family. Maybe you just don’t have that kind of cash on hand. But here’s the tricky thing about this particular regret: Unlike saving inadequately, which everyone would regret, not buying a home is actually the right move for many people.
How to Keep It From Happening: To keep from regretting not buying a house, you need to buy only when it makes sense for you. If you can say yes to the following questions, then it could be the right move:
· Do you have enough saved up to not only make a down payment but also leave your emergency fund and retirement savings intact?
· Do you plan to live in the house for at least five years, so you’ll be able to recoup your moving investment?
· In the area where you want to buy, is your price-to-rent ratio more in favor of buying?
4. Buying a House
It’s the other side of the coin: regretting taking the plunge and buying a house. Since we don’t imagine people are regretting having somewhere to live, it’s likely that this regret stems from having what is called an underwater mortgage, a situation that one in three United States homeowners is currently struggling with.
This means that they owe much more on the house than it’s worth in the current market, so they can’t sell it unless they have the cash to make up the difference on hand. This situation, in which the homeowner can’t afford the mortgage payments but also can’t afford to sell, often leads to foreclosure.
How to Keep It From Happening: To prevent homebuyer remorse, you need to buy only when it’s right for you (see above). For some people, strategic default–simply walking away from the house and leaving the mortgage unpaid–is a viable option, but that depends where you live and on your individual situation. To consider whether it’s right for you, read this.
5. Not Saving Enough for Retirement
No matter how far (or near) your retirement is, if you intend to maintain your current standard of living without bringing home a salary, you’ll need the funds to cover your living and entertainment expenses, not to mention medical or family emergencies, which become more common as we grow older. The easiest way to have that money when you need it? Start putting it away today.
How much should you allocate to this goal? About 20% of your salary should go toward your financial priorities, which include retirement, debt payment and other savings.
How to Keep It From Happening: Save, save, save.
Here’s to no more regrets.