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.
If you don’t have a particular spending trigger, you should
still create a budget and take stock of your spending every day in your Financial
Inbox. That’s the best way to make sure you’re not going over. For
more information on overspending, check out our Psych of Money section. If you find yourself in debt,
our free Get Out of Debt Bootcamp can help you figure out how to
escape.
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.
(More on exactly how you should create and use an emergency fund here.)
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. Fortunately, we can help you
with all of these. Use the LearnVest
My Money Center to set your budget. We recommend setting your budget
up according to the 50/20/30 rule (which you can learn more about here).
If you want to be walked through setting up financial savings
goals, take our free, two-week Take
Control Bootcamp. If you’re looking for a little more money to send to
savings, our free Cut Your Costs Bootcamp will help you shrink your bills so
you can devote more money to your savings.
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?
For more information on buying a home, see the loans and mortgages section of The Knowledge Center.
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). If you’re already in the unfortunate situation of having an underwater
mortgage, we present your options here. 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. We cover the basics of what you need to know about 401(ks),
IRAs and more here, and for more information we have an entire section of the Knowledge Center
devoted to retirement. Not sure where to start? Begin with our checklist: I Want to Save for Retirement, which will walk you through
everything you need step by step.
Here’s to no more regrets.
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