A lifetime of good financial decisions can all be undone with a few poor financial decisions that have long term impacts. Sometimes the biggest key to financial success is driven by the actions you avoid rather than the actions you take.
Why do most people make financial decisions that they will regret?
The primary reason is that they lack knowledge of other options or they don’t understand the long term consequences of the decision. Most of us make important financial decisions on a very short term planning horizon and don’t understand long term consequences.
What is a poor decision that people make with retirement savings?
The biggest is waiting to start saving for retirement and then they compound it by not aggressively reaching maximum savings as soon as possible. Time is the greatest asset we all have to exceed our savings goals without making other sacrifices.
Do people make poor decisions when it comes to their kids?
The first is not making a good decision on their choice of college that balances academics and the cost of the education. Going into massive debt to send your child to an expensive school at the expense of your retirement savings is a double whammy. You have more debt to repay and there will be increased pressure to work longer or save more to be able to retire.
Is there another poor decision that people make regarding their kids?
The second one is bailing their kids out of financial situations that require them to tap their retirement savings. Parents, especially those who are retired, are usually not really in the position to help their kids financially without risking their own retirement.
What are other financial decisions that people might regret?
One decision that too many people make is to borrow from their 401k account. This action lowers your earnings, and during the time you are repaying the loan you are not building your retirement fund. This lost time is very difficult to overcome.
Are there ways people can avoid making poor financial decisions?
Choosing to avoid help is never a good decision and always has a negative financial impact. No one can understand the nuances of tax law, investment choices and estate planning. Seek out trusted advice when making any type of financial decision.