How to turn money regrets into positive financial change

How to turn money regrets into positive action

Regrets—who hasn’t had them? Because I talk to people about financial matters, the “if only”s I hear are usually money-related: If only I would have started a 401(k) in my twenties, saved for a home in my thirties, invested smarter in my forties—or, for many people 50 and older, all of the above.

If only you could turn back the clock and arrange a do-over.

While that’s not in the cards, you can use feelings of regret to spur you to action. Of course this won’t be perfect, nor necessarily easy. But even a small course correction will take you in a better financial direction.

Read on for conversations with three real people, in three different stages of life, about their own money regrets. I hope these honest stories resonate with folks who feel the need to make a few tweaks to their own financial situations. You might even find that something you consider a big “mistake” is actually not as bad as you think. No matter, the trick is using regrets to nudge you toward positive change.

Your twenties: Making money is just the beginning.

Landing that first job is a big deal, and getting that first fulltime paycheck signals newfound freedom, even if taxes and other payroll deductions seriously downsize your net income. Trouble is, our obligations don’t end when the cash hits your account. Here’s the story of Elena, 24, who didn’t follow through—and it cost her.

After I graduated from college, I started working as a freelancer taking various gigs. When tax season came, I felt so intimidated by the whole thing that I just found an accountant on Yelp and dumped all my tax documents on her. Turns out, I had never received a few of my 1099s, which means I never declared that income on my taxes. Fast-forward three years to a scary letter from the IRS saying I owed thousands in taxes, plus an additional $2,000 fee for not doing my taxes right.

Takeaway: After hustling on the front end to land freelance work—a huge accomplishment—Elena didn’t take time to understand the process on the back end. Hey, you’re going to make mistakes, but taking time to learn even the bare essentials can keep your regrets to a minimum.

Your thirties: A transitional time.

Once you hit thirty, you hopefully have a slightly better grip on the basics, but there’s one message you might not have gotten yet: It’s time to start thinking about the future. And even if you are doing the right things—like taking advantage of tax-favored retirement plans—it might not feel that way. Take super-responsible Corinna, 32.

I’ve dumped a lot of money (more than $50,000) into retirement accounts, including IRAs and a 401(k), because I thought it was the right thing to do. But now I can’t touch it—or at least I’m not supposed to. I wish I’d considered other ways to invest that money and the possibility of higher returns, even if that meant higher risk—like buying property, for example. I never even considered if I believe in the traditional concept of retirement, and yet there I was locking money away while I’m pinching pennies in my twenties.

Takeaway: Shoulda, woulda, coulda? Not really. Corinna did the “right” thing but now has second thoughts. Still, I bet a decade from now, she will look back and thank her younger self for funneling that paycheck into her retirement plan. And even if she loves her work and never wants to retire, the fact is that maxing out long-term, tax-favored savings is one of the smartest moves around. Just ask this guy…

Your forties: Thinking big-picture.

Older and wiser doesn’t mean you won’t make any money missteps. It’s just that by midlife, you can’t afford (literally) to take as many risks. Enter Billy, 48, whose story might make Corinna feel better about her own priorities. Let’s just say socking away too much in a retirement plan isn’t something he regrets.

One of my main regrets is not saving any money when I was younger. Saving had no importance to me. I was spending every last dime and living paycheck to paycheck. I even cashed out a few 401(k)s during that time as well. About 15 years ago, after speaking to mentors and fellow construction workers about what they’re doing for their future, I realized I didn’t need to spend as much money as I thought I did. It was a mistake not starting earlier, not protecting what retirement money I did have, and not maxing out contributions to retirement savings in general. I probably would have double what I have now in my 401(k), but at 48 years old, I am finally on track to have a good retirement fund.

Takeaway: Changing course as soon as Billy noticed his error was key. And an extra piece of good news is that in a couple of years, when he’s 50, Billy can start making catch-up contributions to his retirement accounts: up to an extra $6,500 per year to his 401(k), and up to an extra $1,000 per year to an IRA. He would be wise to take advantage these opportunities for older American retirement savers.

(Names were changed for privacy and quotes were edited for length and clarity.)

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