Financial mistakes can be costly. Even a decision that seems small in the moment can have far-reaching repercussions that you didn’t expect. Sometimes, these mistakes are easily rectifiable; other times, they lead to lasting money regrets.
When it comes to financial regrets, there are some that are shared across generations. A 2022 ConsumerAffairs survey found that the number one financial regret boomers, Gen Xers and millennials all share is not becoming financially literate when they were younger. Considering how important personal finance education is in terms of building a financially secure future, this isn’t too surprising. That doesn’t make these regrets sting any less, though.
Besides neglecting financial education, there are many other shared money regrets across generations. Here are the top 10 biggest ones, according to ConsumerAffairs survey data.
Percentages are based on how many respondents chose the answer as the worst money-related decision they’ve ever made.
Waiting on Financial Education: 23%
Tied first with spending money on unnecessary material items is neglecting personal financial education. Nearly a quarter of baby boomers, Gen Xers and millennials all agreed this was their biggest money regret.
Financial education is a key part of being able to manage your money and make sound financial decisions. Having a solid foundation can help you achieve short- and long-term goals, such as investing in retirement, creating an emergency fund, buying a home and paying off expensive debt.
I’m a Financial Planning Expert: Here Are 5 Things You Should Never Spend Money on If You Want To Be Rich
Making Unnecessary Material Purchases: 23%
Many older individuals regret buying a lot of material items they didn’t really need, especially when it meant missing out on valuable or memorable life experiences.
“Having worked with boomers, Gen Xers and millennials, the biggest money regret I consistently hear across all generations is spending money on material things instead of life experiences,” said Andy Krafft, CPA, CFP and wealth advisor at Luminary Wealth.
“Almost everyone regrets a purchase at some point in their life, whether it be an expensive car, house or even overpriced clothing, but I rarely hear people voice regrets about experiences they’ve shared with family and friends,” added Krafft. “The material things eventually pass away and are forgotten, but the shared experiences last forever, making it a worthwhile investment.”
This goes for luxury purchases, too, especially those that don’t generate income.
Karl Jacob, the CEO at LoanSnap, added, “One of my favorite sayings, ‘If you can’t afford two of something, don’t buy it’ applies here [because] most people regret big purchases — whether [they’re] vacations and/or luxury items that don’t generate cash flow.”
Living Paycheck to Paycheck: 22%
Around 69% of Americans live paycheck to paycheck, according to PR Newswire. There are many reasons why people live this way, but one of the biggest ones comes from overspending.
When you live paycheck to paycheck, it’s difficult to save, pay off debt or improve your financial situation. In order to break the cycle, you might need to reevaluate your income and expenses, as well as set some goals for yourself.
Christopher Day, CEO and founder at Days Global Advisors, suggested, “Start saving and try not to be a victim of excessive consumption. Maximize your IRA. It will make a difference.”
Renting Rather Than Owning a Home: 20%
A fifth of survey respondents noted that they regretted renting instead of buying property the most. “For many, [purchasing a house] continues to be the best way to retain wealth as home prices tend to appreciate,” said Jacob.
Along with this, Jacob found that people tend to regret not refinancing their home for a lower rate when they had the chance. “Many people who could have gotten a low interest rate loan — lower payments — locked in for 30 years didn’t,” added Jacob. These same people ended up paying much more each month than they needed to, even if they eventually refinanced their mortgage.
Not Having an Emergency Fund: 20%
An emergency fund is a key part of obtaining financial security, but many people wait too long to start setting aside money in one. Without this fund, it can be harder to manage unexpected or sudden expenses. When these expenses do come up, people often turn to debt to be able to pay for what they need.
“Over my career of 23 years as a financial advisor, I’ve inherited clients that regret not saving for their kids’ college expenses, not having an emergency fund and not living within their means,” said Brad Hindman, CFP, financial advisor and managing director of investments at Wells Fargo Advisors.
Engaging in Frivolous Spending: 20%
Frivolous or excessive spending is another major financial regret many people share. Not only can this limit one’s ability to save, but it can also lead people to accruing expensive debt.
As with buying unnecessary material items, there are many reasons why people engage in frivolous spending. One of these reasons is in an effort to keep up with the Joneses.
“Some of the worst financial decisions boomers have made is trying to keep up with the Joneses and taking on more debt than they can handle,” said Sebastian Jania, owner of Ontario Property Buyers. “Living with a credit mentality [is] something that was popularized just a few decades ago, and has unfortunately left a lot of boomers [in] tough financial spots.”
Fortunately, Jania added, there are ways the younger generations can learn from their elders and avoid making similar mistakes. “For the younger generations, they can learn to use leverage strategically rather than using leverage on things that won’t make [them] money, such as having nicer clothes.”
Having No Long-term Financial Plan: 19%
For many young people, it’s not always easy to see the bigger picture. This often leads people to neglect creating a financial plan for their futures, which can jeopardize their financial security or set them back several years.
Taking some time to plan out your finances and life goals can help get you on the right track and ensure you achieve what you’ve set out to do.
Not Saving Enough for Retirement: 19%
When you’re younger, it’s easy to think of retirement as something for your future self to worry about. But this thought process can lead to some major regrets down the line, especially if it means you don’t save enough money to retire comfortably when you’re ready to do so.
“I sense the deepest regret comes from those who waited too long to plan for retirement. Every few months, I’ll meet with client referrals and they express that they want to retire… now. Yet, when we calculate their assets and resources and show them that they haven’t factored in taxable income or healthcare, for example — and that their money will last about 4 years, it’s a real ‘punch in the gut.’ Do not wait later than age 50 to create your retirement plan,” said Hindman.
“Save as much as you can as early as you can,” suggested Krafft. “Don’t wait until you have everything figured out to start saving money towards retirement. And don’t feel bad if you can’t put away the typical recommendation of 15%-20% of your income. Any little bit you can put away today will be worth it down the road.”
Allowing Lifestyle Creep: 18%
Lifestyle creep, or lifestyle inflation, is what happens when you spend more money as you make more money. Over time, this increased spending starts to feel necessary, putting you in a position where you need to continue paying for goods and services that you might not actually need just to maintain your new lifestyle.
This can lead to greater financial struggles later on, especially if your income drops or your cost of living increases more quickly than your earnings. And it can make it harder to save or invest.
Not Investing: 18%
So many people wait to invest until much later in life, or when they feel they’re finally earning enough money to make it worthwhile. But the sooner you start investing, the more your money can grow — and potentially set you up for a more financially secure future.
“My advice for younger generations is ‘Time is money.’ Specifically, compound interest is your best friend when it comes to saving money,” said Hindman. “I’m grateful that my parents encouraged me to become financially savvy. For example, my mom gave me a book when I was 17 that inspired me to start saving — and I distinctly recall seeing examples of compound interest and my jaw literally dropped.”
Hindman gave an example to illustrate the way compound interest works.
“At age 18, it takes a monthly investment of $322 at 8% annual compounding interest to have $2,000,000 at age 65. However, if you wait until age 40, that number increases to $2,102 monthly, and if you wait until age 50, that number increases to $5,779 per month,” said Hindman. “The total amount of money invested at age 18 is $181,608 vs. $1,040,220 at age 50. It doesn’t take a math whiz to understand that ‘time is money.’ Literally.”
More From GOBankingRates
This article originally appeared on GOBankingRates.com: The Biggest Money Regret That Boomers, Gen Xers and Millennials Share