Money Mistakes At Every Decade
Life moves fast. Every decade presents you with new challenges — and brand new ways for you to make mistakes. Whether you’re 25 or 55, you have to make decisions about your financial future, and it’s pretty easy to mess it up.
But if you know what mistakes to look out for, you’ll be prepared to avoid them, and to make sound financial plans. Find out the common money mistakes at every decade, and the best ways to defeat them:
- Not negotiating your salary or asking for a raise. You might be throwing away millions of pesos over the course of your career if you never negotiate your salary. When you’re considering job offers, do some research on the typical salary for the position, and ask your hirer if the salary is negotiable. If it is, bring your negotiating skills to the table and get the numbers you deserve for the position. If not, try to work something else out, like flexible hours or more vacation days. If you’re already hired and feel that you deserve a pay rise, don’t be shy. Read the 6 do’s (and 1 don’t) of how to get a raise.
- Not saving for retirement. 20-somethings don’t like to think about retirement, but this is a huge mistake. You should be putting away money for your retirement as early as you can, while time and the magic of compounding interest are on your side. As we said in our article 3 Smart Financial Moves to Make in Your 20s, you could lose P3.5 million if you wait until you’re 35 before you start saving rather than starting at 25. If you start putting your money in the right products as early as you can, you can be well on your way to a happy retirement.
- Not discussing finances with your partner. Marriage is a huge commitment, but a lot of couples avoid the thorny discussion of money until it’s too late. Studies show that arguments about money are longer and more intense than other marital disagreements. Avoid these difficulties by opening up an honest dialogue with your partner both before and after the marriage. Learn how to have the dreaded money talk with your significant other with our article.
- Not saving for your child(ren)’s education. College is expensive. One year at a top tier Philippine university will cost you almost P170,000 — and that’s not including room and board and all the other expenses not covered by tuition and fees. The moment you decide to start a family, you should be making plans for how you’re going to pay for their education. Pick an investment tool that will grow your money and beat inflation so when it’s time for your child to go off to college, you can rest assured that their education is covered.
- Not saving enough for retirement. The 10% of your income in your 20s that you used to save for retirement isn’t going to cut it any more. You should increase your retirement contributions once you hit your 40s. Michele Clark, a certified financial planner in Chesterfield, Missouri, recommends that people increase their retirement contributions by at least 1% each year they are in the workforce.
- Not investing aggressively enough. If your investment personality has been conservative up to this point, now’s the time to go more aggressive. Higher risk, yes, but you’ll also get higher yields, which means you’ll achieve your long-term financial goals faster. Your 40s are your high-earning years, so make the most out of it with well-chosen aggressive investments for long-term goals (like retirement). There is an exception — for shorter-term goals, like college education when your children are less than 10 years away from graduating high school, put this part of your portfolio in more conservative investments.
- Dipping into your retirement savings. If you’ve been saving diligently for retirement since you were 20, your retirement account is probably looking very healthy right now, and you might be tempted to dip into it to fund your child’s college education, or to splash out on large expenses, since retirement is just around the corner anyway. Don’t do it! If you really need the extra money for college, let’s say, it’s much easier to get a student loan than it will be to replenish your retirement savings. Make sure that retirement savings are used only for that purpose, and nothing else, no matter how tempting it might seem to spend some of it now.
- Not buying long-term care insurance. You might think about postponing getting long-term care insurance because the thought of needing it is still so remote to you. But your early 50s is the best time to buy long-term care insurance. Most health changes happen in your late 50s, so if you buy into a good insurance plan while you’re still healthy, you’ll get discounts and pay less in the long run than if you started at 60.