Image by Shameer PK, on Pixabay
I am in my early fifties now and have plenty of financial regrets, I have worked long and hard all my life from when I was 15 and mostly only have debt to show for it, not just because I made some poor decisions around debt, but I didn’t form good financial habits earlier in my life, if I had, I would certainly have a better quality of life now with a lot less stress.
Some people say, it’s only money, but from personal experience, debt is one of the most stressful things you will have in your life, but the best thing is, it is controllable by you. Ideally the best strategy would be not to get into debt in the first place, but unfortunately most of us have been brainwashed by society and the media through advertising that personal debt is normal. It is not!
Even most governments around the world are up to their necks in debt, is it any wonder we think it is normal. It is financial freedom that should be the norm. It’s not just about steering clear of debt, but having good financial habits will put you on a good financial footing so that you can do the things you want in life.
These are my financial regrets that I hope encourage you to start putting good financial habits in place, sooner rather than later, it’s never too late to change!
1. Not Having a Realistic Budget
First you have to have a budget, but more importantly is having a realistic budget. I had toyed with budgets for the past few years, but they were not always realistic. Once I started to include everything and I mean everything that I had to budget for, this really helped me to manage my money. You can allocate money for each area that you want to progress. How are you going to buy your first home, if you don’t start saving for it, how are you going to have that holiday, if you are not saving for it, or that new computer you need for your studies.
When you first start to look at your spending, you may be shocked. Especially those small expenses, you tend to forget about. If you grab a coffee on the way to work, add the cost of those coffees up over the month, then the year, then 5 years, you will be shocked. What about treating yourself to a coffee once a week, you will appreciate it more and save money too. It is often not the big things that get our finances out of control, but those little spends here and there, that all add up. Once you are financially free, you can buy as many coffees as you like, if that’s what you want.
Consider all your annual costs including travel, car, holidays, clothes, hobbies, savings, investments, hairdressing / barbers, socialising, then allocate a monthly fund for each. It won’t take long before you have formed good budgeting habits and you will have money set aside for what you need or want, it beats borrowing. Setting and sticking to a personal budget is the first step to financial freedom.
To start you budget, you could use a spreadsheet, an App or a budget book, whatever is your preference, it’s about what works for you, test some out, if it’s not working, try something else. I use a budget book, it’s easy and simply to use and has a section each month for your financial goals, tracking spends and reflecting, which is key if you want to change bad financial habits. I use the Clever Fox Budget Planner.
2. Getting into Debt
Debt is the single thing that will prevent you from having financial freedom. Now I do understand that there are certain times in your life that you need to obtain credit in order to move forward, purchasing a home is one, possibly a car and education. However, the latter two should be avoided if at all possible, if not then prioritise and get it paid off as soon as you can. Any debt outside this is really not a good idea, I accept you may need some debt to start your own business, but if at all possible save to invest in your own business or start small and expand gradually over time. Never get into debt for clothes, holidays, the latest gadgets, or anything you want right here right now, have patience and save for what you want.
If you are in debt and you are struggling to manage, I highly recommend StepChange, a charity in the U.K. who do an assessment, giving you options to manage your debt and an action plan to tackle it too. I have a debt management plan with them, I pay them a monthly amount and every penny is distributed fairly to my creditors. If you live outside the U.K. is there a reputable charity that can help you? Beware of private companies that say they can help, they are mostly out to make a profit out of you, I made this mistake in the past.
When I talk of debt, I am also referring to borrowing from family or friends. For years when I was living at home with my parents, I owed my Dad money every month, it became the norm to do this. Stopping this habit was initially difficult, but I did manage to do it and it was a nice feeling when I got to keep my monthly wage to myself, instead of constantly having to pay back what I had borrowed the previously month.
I also believe borrowing from family and friends leaves you with an uncomfortable hidden energy between the two of you, it has for me anyway and if things go wrong it can damage relationships, so avoid if you can. I have lent money to people in the past who have not paid me back, trust me it damages relationships. Gifting money is fine, as long as you don’t expect it back. A word of warning, if you do borrow money from friends or family or lend money to them, have a contract drawn up, even if you do it yourself and get them to sign it, ideally get a witness too. Set out the repayment terms in detail, I don’t care how much you trust this person, I am speaking from experience here.
3. Not Having a Work Ethic
Now you may think a work ethic has little to do with finances, but it has everything to do with it. I have a good work ethic, so this is not an entire regret of mine, but I don’t want it to be yours. I have worked two jobs, worked 7 days a week, worked 70 hours a week, and worked full-time whilst doing a 6 year part time degree. But, I have only worked my main job for about 4 years now, although I am currently looking for a second part time job, ideally to work at home to speed up my debt repayments.
If you develop a good work ethic, you can maximise your income, save and pay off any debts early. Even if it means you work two or more jobs, to get yourself in a better financial position. This is especially true when you’re young, as you have the energy and motivation to work longer hours, this becomes more difficult as you age. Trust me, when you get to having 30-40 years of work behind you, retirement often becomes your main goal, especially if you’re doing a corporate 9.00 – 5.00 job. So work more whilst you are young if you want to retire early with funds to enjoy the rest of your life and use the extra money for something specific like debt repayments or a savings goal.
4. Not Investing Young
This is definitely one of my financial regrets. For me I used to think investing was for the rich, well, guess what, investing can make you rich! If you are an impatient person (like me), then you may put off investing because you think 10 years + is a long time, what’s the point, I need money now. But, this thinking will get you nowhere, make investing a habit, start off small, overtime with compound interest you may have yourself a nice little ‘nest egg’ that will give you the financial freedom you want, enabling you to retire younger and give you peace of mind, how good would that be?
This is one regret I have not yet fully addressed, I know how I want to invest, but am trying to reduce my debts first.
5. Not Building a Savings Habit
I have pretty much always lived pay day to pay day, if there was money in my account, I thought it was there to spend, not save. How wrong was I? Many years ago my Uncle told me no matter how small, always put some money aside every time you get paid, he suggested starting with just £5. I knew he was right, but in the back of my head I was thinking ‘yeah, but you’ve got money to save, I haven’t. This kind of thinking was just an excuse, off course I had £5 to spare each pay day, I just thought I was young, I will do it in the future, but never got around to it, before you know it you’re in your fifties. My Uncle suggestion of £5 was to get me into the ‘savings’ habit, the amount didn’t matter.
I was only in my twenties when my uncle gave me this sound advice, it took me until I was in my fifties to start saving. Not getting into a savings habit is one of my biggest regrets because I have debts, whereas if I would have saved, I wouldn’t of had to accumulate debt. I also want to retire soon, at least from the 9.00 – 5.00 rat race and focus on working for myself, but there is no chance of that any time soon.
I have now in the past year accumulated an emergency fund of over £1000. I will slow down my savings as I try to tackle my debt. Having this emergency fund makes me feel psychologically more secure.
Not having savings accounts including an emergency fund, saving for first home, car, holidays, home maintenance, wedding etc will hold you back, cause you some stress at times and potentially delay your goals. Start with saving £1, it is forming the habit that is key initially.
6. Not Paying into a Pension
Now I do get this, when you’re young, retirement seems so far off and if you are like me, you believe that sometime in the future you will have money. Wrong, if you don’t form good financial habits, you will be as poor as you are today, even if you increase your income, without these habits, you will be no better off.
The earlier you start saving into a pension, the less you put in each pay day, regular amounts soon build up, especially over time, so try and make this a priority, if you do, you can retire sooner and be financially comfortable.
7. Not Living Below Your Means
The ‘I want it and I want it now’ attitude is going to prevent you from achieving financial freedom. If you want to get on the property ladder, don’t even look at your ideal home, start small, buy a one bedroom flat if possible to start, it is called the ‘property ladder’ because you work your way up it over time, one rung at a time. Apart from being stressful, having a high mortgage hanging over your head, over stretching your self financially is very risky, you don’t know what lies ahead.
The concept of ‘Paying Yourself First’ is key here, so that you can live below your means. Pay yourself what you need to live on and to secure your future; food, clothes, education, petrol / travel, pension, savings, education, then you can look at what you can afford in terms of somewhere to live, holidays and other luxuries etc.
Living below your means is not just about your home. General overspending will prevent you from reaching your financial goals. I used to get paid, then literally spend every penny, I purchased lots of clothes, because I like clothes. It is only since I stopped doing this that I was able to save my emergency fund. I only purchased two items of clothing this summer, a dress and a shirt, both cost me less than £50. I normally buy at least one pair of boots every winter, not this winter, I already have about 6 or 7 pairs in good condition. I am not purchasing a coat either this year, I am going to use what I have for as long as I can, whilst I am working towards my financial goals.
8. Not Investing in Your Education
I have undertaken a couple of courses this year, but there are things I want to learn to improve my earning potential but I simply can’t afford either the course or the software at the moment. Although this lack of investment is holding me back from reaching my financial goals, I am trying to do free courses where I can, practising and learning.
Not only can learning new skills improve your earning potential, they can also give you the opportunity to earn extra money on top of your main income so that you can attain financial freedom sooner rather than later.
This one is a financial regret I am still living at the moment, until I tackle my other financial priorities such as my debt and securing my home.
This is not an exhaustive list, just the main financial regrets for me. How you put good financial habits in place is up to you, do some research, choose ones that appeal to you or may make it easier. For example, if you want to start saving, it’s fine to start saving in a tin, if you like to see a visual of your money growing. I like to see this visually, but I just log on to my online savings account and give myself a pat on the back for saving what I have so far, this helps keep me motivated. Another excellent motivator for me, is keeping a log on a spreadsheet of my net worth, it increases each month, I do highly recommend doing this, it works for me and may work for you too.
There are many methods for getting out of debt, savings, and plenty of online resources and Apps to help you. As well as a vast amount of information on the internet, You Tube is another good resource, especially watching others who have achieved financial freedom. There are also some great books also which can really change your mindset about personal finances, Rich Dad, Poor Dad – Robert T. Kiyosaki was a turning point for me which helped me start to turn my finances around. I guess regret number 9 is not educating myself on personal finances sooner, but at least I am doing now. So what are you waiting for?