Do you have any regrets in life? You've probably done a few things you wish you hadn't, like adding sour milk to your coffee or washing your new red sweater with your good white shirts.
Those regrets can be painful, but the effects are short-lived. Financial regrets can have longer-lasting consequences – and, according to a recent survey from Student Loan Hero, 76% of Americans have some form of financial regret.
Most financial regrets come from the same basic principle – spending too much money instead of saving it.
In the past year, not saving enough was the top regret of 46% of survey respondents. Half of respondents regretted not saving more for retirement, and just over one-third would contribute some of their spending to a 401(k) plan or IRA if they could recover the funds.
Says Miranda Marquit, a financial expert who works with Student Loan Hero, "It's clear from Americans' regrets that they know what they should be doing. However, knowing is only part of the battle. You also need to act on it."
The next largest financial regret was spending too much on unnecessary items, cited by 42% of respondents. Dining out was the largest indulgence by far, with 51% saying they needed to cut back on their restaurant bills – over twice the percentage that regretted buying clothes/shoes (22%) or paying too much for cellphones and service (20%).
Smokers and drinkers expressed a need to cut back, with 15% saying they spent too much on cigarettes and 10% citing excessive bar expenses. Among other regrets, 14% of respondents tended to overfill their grocery cart, and 10% say they need to cut back on coffee.
Over the past five years, two categories of overspending stand out. One-third of Americans regret overspending on clothes, while 38% wish they had spent less on entertainment such as streaming services and cable TV.
Suggests Marquit, "One way to improve financial outcomes is to pay attention to your spending. It sounds simple, but track your spending for a month. You might be surprised to discover how much you spend on things that don't matter to you.
"Once you know where the money is going, compare it to your values and priorities. If your spending doesn't line up, cut out the things that just don't matter."
The third-largest financial regret in the survey concerned debt. Approximately 30% of respondents said they failed to pay off as much debt as they wanted to over the past year. Credit card debt was the primary debt regret, with 47% of respondents regretting credit card purchases.
It's no surprise that credit card usage leads the list. Credit card debt is generally the highest interest rate debt that people have – as of May 2018, the average APR was 16.73%. Credit cards make impulse buying easier, and impulse buying is more likely to result in regrettable purchases.
Other debt regrets include student loans (16%), medical debt (15%), auto loans (9%), and personal loans (8%). Surprisingly, only 5% regret taking out payday loans – the same percentage that regret mortgage debt. That may reflect few consumers taking out payday loans, or it may show that payday loan consumers find the alternatives to be worse.
How can you avoid financial regrets? "Consider automating your savings," counsels Marquit, an author and blogger. "Boost your retirement account contributions and arrange for automatic transfers from your checking to savings account regularly. That way you don't have that money to spend on the things you'll regret later.
"In the end, it's about getting honest with yourself about what matters most, being aware of your money choices, and then trying to redo your spending plan so your money helps you achieve your goals."
Solid financial planning and regular budgeting are the keys to eliminating monetary miscues. Most of the categories of regret are the result of poor or no financial planning – or the lack of willpower to follow a good plan.
Set a realistic budget, including saving for both an emergency fund and retirement, and stick to it. If you don't know how to begin, try the 50/20/30 rule – limiting spending on food, housing and other essentials to 50% of post-tax income, applying 20% to savings or paying down debt, and using the remaining 30% for lifestyle choices. You'll save your targeted amount, pay your bills on time, resist overspending – you get the idea.
Why not check your income and expenses, set savings goals, and make a budget today? If you already have one, review it to make sure you're still on track to meet your goals. Adjust your budget if necessary. And smell the milk before you pour it!
If you want to reduce your interest payments and lower your debt, try the free Debt Optimizer by MoneyTips.