Half of us living with financial regrets, like not saving for retirement or paying down debt, haven’t even begun to solve them. That ends now.
Stop being stuck in a financial rut.
About half (49%) of those who have saved too little or who owe too much aren’t doing anything to solve their money problems, according to a Bankrate.com report released Wednesday. A quarter said they have “no plans” to address the issue, and just under 1 in 5 (19%) said they’ll “get around to it” in the next year, according to the survey of just over 1,000 people.
The problem is, the most common financial regrets that are taxing so many of us are too serious to ignore: Nearly 2 in 5 survey respondents said they are not saving enough for either retirement or an emergency and, and 1 in 5 are most concerned about being in debt. But both issues are so daunting that many people probably feel frozen in place: National credit card debt and student loan debt recently passed $1 trillion; 6 in 10 Americans (61%) don’t have enough cash saved to cover a $1,000 emergency; and while the typical retirement costs $738,000, only 9% of American women have $300,000 or more saved.
“In a word, it’s ‘inertia,’ which is working against you because you just can’t get started,” Greg McBride, Bankrate.com’s chief financial analyst, told Moneyish. But you can make inertia work for you by automating deposits into your retirement and savings accounts, as well as setting up automatic payments for your credit cards and student loans; all the work is done for you.
Here are the five biggest financial regrets from Bankrate’s report, and the baby steps to start facing them today.
You haven’t saved enough for retirement. Most respondents wished they had started saving for retirement earlier, and McBride noticed that these nest egg regrets increased with age, peaking in the 70s. (Census Bureau data shows that the average retirement age is about 63, although a recent Gallup poll finds working Americans expect to retire at 66.) “As you get closer to retirement, you realize that you’re behind,” he said. “But it’s never too late to start saving, and there’s no better time than the present.”
Automating your deposits is the best way to begin a regular practice of contributing to your retirement account. “Have payroll set up automatic deductions into your workplace 401K or other retirement plan, or if that’s not available, open up a Roth IRA and transfer over monthly deductions from your checking account,” he said. Or take a look at your monthly budget, and see if you can bump up what you are contributing now, especially if your employer matches it.
So how much do you need? This depends on how much you want to spend and how comfortably you want to live once you retire, but the conventional rule of thumb suggests a nest egg of $1 million to $1.5 million, or 10 to 12 times your current income, according to the AARP.
Your emergency fund is in crisis mode. The second most common complaint was not having enough money saved for something like a sudden health problem, car repair or losing a job. “Don’t wait until the end of the month and save what’s left over — pay yourself first!” said McBride, who recommends automatically transferring 10% of your paycheck into savings. HalfBanked.com writer Desirae Odjick suggests doing a self-audit to determine how much you can save after paying off essential monthly expenses. If you can put 15% of your salary towards financial goals, for example, you put 5% into your emergency fund, 5% into retirement and 5% toward paying down debt.
He stressed that putting your paycheck toward retirement and emergency funds takes precedence over all other money regret. “It’s really easy to sit back and say, ‘I’ll save when I make more money,’ but you need to save now,” he said. Making it automatic makes it a habit. Plus, when does anyone ever have ‘enough’ money? “Don’t leave your savings to chance; make it happen automatically before you even roll out of bed on pay day morning.”
You’re carrying credit card debt. One in 10 respondents is stressing over the balance due on their cards — although this group was also most likely to be taking steps to pay it down. “That’s a very high interest-rate debt (17% on average), so what’s left in your paycheck after you contribute to retirement and savings has got to be put toward paying down that credit card debt,” said McBride. “That might mean cutting expenses, moving in with a roommate, or taking a second job long enough to get that debt paid off.” Start by paying down as much as you can on your highest interest-rate debt, and the minimums on all others, until you’ve paid them all off.
And stay out of trouble with your credit cards as you’re paying them down — and once you’ve paid them off — by leaving them at home when shopping in brick-and-mortar stores, unless you have a specific purchase in mind and a shopping list in hand, as recommended by CreditCards.com. When shopping online, don’t store your credit card number on sites, which makes one-click ordering too mindless; you’ll think before you hit “purchase” if you’ve got to punch in that 16-digit number every time. Unfollow brands on Twitter and Instagram that tempt you to spend. And curb impulse buys by keeping items in the virtual shopping cart for 24 hours; then if you still want it, you can click on it.
You’re drowning student loan debt. Being in the red for your college or graduate degree(s) comes just behind credit card debt, but McBride said this should be among the least of your money regrets. “Particularly when you’re talking about federal student loans, there’s a low interest rate (around 6%) and there’s a lot of flexibility on student loans that no other creditor is going to give you,” he explained. For example, you can get a deferment or a forbearance if you run into financial difficulties, and some loans are potentially tax deductible. Plus, some states and industries (like public service and education) have student loan forgiveness programs.
“Make the minimum monthly student loan payments, but put more money into your 401k,” he said. “And 10 or 20 years from now, you’ll have paid off your student loans and you will be sitting on a pile of money in your retirement account — as opposed to just starting to save for retirement because you were spending all of your money to pay down that low-interest debt.”
You haven’t saved enough for your children’s education. Parents, this is one less thing to feel guilty about. “Focus on your retirement fund first,” repeated McBride. “Your kids can borrow money to go to college, they can borrow on very attractive terms and they have a 40-plus year career to pay that off. You can’t borrow for retirement.”
And when your kids are applying for student loans, he recommended that “the total student loan borrowing shouldn’t exceed the typical first-year salary in your child’s particular field.”
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