Only one-fifth of American adults say they have no financial regrets whatsoever, and 73% say that they regret making one of six specific financial mistakes, according to a new survey.Here's what money mistakes Americans regret, and how to prevent the regrets of other Americans from becoming your own.
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Americans' financial regrets
Just 20% of American adults said they have no financial regrets at all, in a recent survey by Bankrate, and 73% say that they've made a specific mistake that they wish they hadn't. Here's a breakdown of the survey results:
Data source: Bankrate.
These results shouldn't be too surprising. After all, it's no big secret that as a whole, Americans are doing a poor job of saving for retirement. And a Federal Reserve report found that half of Americans couldn't handle a $400 emergency expense without borrowing the money or selling something.
In addition, the average American household with credit card debt owes $16,048 at an average interest rate of over 15%. Student loan debt has grown dramatically in the past couple of decades, and the average 2016 bachelor's degree recipient with loans graduated with $37,172 in student debt -- an all-time record. Furthermore, most Americans aren't aware of the tax-advantaged college savings options available to them and mortgages can be obtained with a 45% debt-to-income ratio, which can be way too much for many Americans to handle.
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Here's how to avoid any more financial regret in your life
The good news is that you don't have to be one of the four-fifths of Americans who say they've made financial mistakes. And if you've already made one of the financial mistakes on this list, you may be surprised at how much damage control you can do to change your situation. Here's a list of ways you can proactively avoid the most common financial regrets, as well as links to more detailed discussions that can help you get started.
- Retirement savings: If you haven't started saving for retirement yet, there's no better time to start than right now. The longer you can allow your retirement savings to grow and compound, the less you'll need to deposit into your accounts to create enough of a nest egg for a comfortable retirement. If you have an employer-sponsored retirement plan like a 401(k), you might be surprised at the difference a small increase in contributions can make. If you don't have a plan at work, consider opening an IRA either traditional or Roth. The tax benefits can be fantastic, and small contributions now can really add up over time. Finally, if you started too late, IRAs and 401(k)s allow savers over 50 to contribute extra to their accounts to catch up.
- Emergency savings: Experts generally suggest that you should aim for six months' worth of expenses in a readily accessible account, but that can be a lot of money. Fortunately, you can make a big difference in your financial security with a lot less. Here are some strategies to build up a savings cushion that can give you peace of mind.
- Credit card debt: If you have too much credit card debt, you should make it a priority to get it under control. It doesn't make much sense to save money, or even invest, if you have high-interest credit card debt. Consider a balance-transfer credit card that can help you pay down your debt more aggressively and save you tons of money on interest.
- Student loans: Unfortunately, there's not much you can do about student loan debt if you've already taken it out. In fact, student loan debt is one of the rare forms of indebtedness that cannot be discharged in a bankruptcy. However, by finding the correct repayment plan for you and learning about the available forgiveness programs, you can ensure that you're paying them back in the most favorable manner. Also be sure you're deducting your student loan interest on your taxes each year.
- College savings: The two main college saving vehicles are the 529 Savings Plan and the Coverdell ESA. Both allow your contributions to be invested, and to grow tax-free until withdrawn for qualified higher education expenses. And depending on your state, a 529 could come with state tax incentives as well.
- Mortgage affordability: It's often the case that the amount of money your mortgage lender tells you that you can afford to borrow and the actual amount you can afford are two very different numbers. The best course of action is to consider your budget and needs to determine how much you should aim to spend when buying a home.
The bottom line is that while financial regrets are common among Americans, they don't need to be a part of your future. And if they are, you may still be able to take steps that can change your situation.
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