Top 8 Financial Regrets Of 2023 Countdown And How To Avoid Them

We countdown the 8 biggest financial regrets Americans claimed to have had in 2023 based on a recent Forbes survey. More importantly, we unpack strategies you can execute today to prevent you from having these same financial regrets in the fugture.
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Sharing Financial Information Can Carry Regret

Kevin Zywna, Wealthway Financial Advisors:  Tonight, we’re going to talk about America’s top financial regrets of calendar year 2023 and how to avoid them in 2024. Let’s not make the same mistakes twice. So I came across a new study by Forbes Advisor that surveyed 2000 US adults at the end of 2023 and found that 82% of them regretted something about their financial decisions that year. And they didn’t take those mistakes lightly. 68% of those said that their mistakes caused them significant stress. So 82% felt like they made a financial mistake last year. And 68% felt deep regret for having done that. So I’m here to try to prevent that from happening in 2024. So I will say, you know, when we first meet with potential clients or new clients, they do come to us sort of with a fair amount of regret that they are just now entering our office. You know, money, finance, personal finance, is a very private matter. And most of us are willing to share details about our love life before we share details about our financial life. That’s how private and sensitive financial information is to those around us. So to open up to a professional about past decisions that you’ve made, potentially past mistakes as well, can be a little intimidating and you feel very vulnerable for having to do that. We understand all that. We know that that’s common for most people. But I will say probably one of the biggest regrets that we see from new clients is, they usually say, “I wish I had done this sooner.” Getting aligned with a truly competent, objective professional who acts as a fiduciary on behalf of their clients. “I wish I had done this sooner” – that is probably the biggest expressed regret that we hear among our new clients once we take them on board. So there’s some perspective and context for you.

Financial Regret #8: Not Earning Enough

How about some specifics on what those surveyed Americans felt? What were the biggest mistakes of last year? Well, let’s start out small, we got eight of them. So we’re going to work down the list number eight, didn’t earn enough money 3% of the population feels they did not earn enough money last year, and they regret that well. Okay. I’m surprised it’s only 3%. Are you kidding me? Like only 3% of the population? Well, the surveyed population thinks they didn’t earn enough money. And that’s one of their biggest problems. Well, that tells me that if only 3% of the population thinks that that’s a problem, that most people are earning enough money, earning enough money to achieve the lifestyle that they generally want to lead to live. Now, we all know that everyone wants to hit the lottery, everyone wants to, you know, have $50 million drop out of the sky into their laps live the life of a billionaire with all the yachts and the cars and the homes and the travel and that type of thing. And but intuitively, we know that that is unlikely, unless we make some radical life changes, that’s for sure. But so most of us tried to do the best we can with what we have in terms of income.

Avoid Financial Regret #8: Spend Less Than You Earn And Maximize The Difference

So if only 3% of the population thinks they need to earn more money, that means about 97% thinks that they earn enough. But they’re just not doing the right things with it. They aren’t maximizing their opportunities with the money they do have. And they probably aren’t making the smartest spending decisions with that money as well to set themselves up for long term success. So those are all behavioral decisions, and have almost nothing to do with the technicalities of personal finance and tax code and tax law and, and company savings plans, and IRAs, and investments, and exchange traded funds, mutual funds, none of that matters if you can’t modify your behavior to such an extent that you can spend less than you earn, and save the difference. That’s the basic fundamental tenants of good financial management: spend less than you earn and save and invest wisely the difference. So number eight regret last year didn’t earn enough.

Financial Regret #7: Not Save Enough For Children’s Education

Regret number seven, saving too little for your children’s education. Again, only about 3% of those surveyed felt that that was their biggest regret. So these aren’t, aren’t major regrets, or at least not widespread across the population, but did not save enough for children’s education. I’m actually surprised this one made the list. It’s kind of a little nippy. Only about 20%, I believe, of the population goes on to higher education after college, I’m sorry after high school, on to college.

Avoid Financial Regret #7: Take Advantage Of Virginia 529 Savings Plans

Now savings plans, Virginia 529 savings plans, one of the best savings vehicles available in the country where luckily, we’re lucky that our state has one of the better college savings plans – the 529 plan. It’s not just for college anymore, it is for any accredited institution of higher learning after the high school years, so that includes all kinds of trade schools, computer training, schools, trucking schools, beautician schools – as long as it’s accredited, you can use that money for long term saving. So just know that the vehicles are available to you. Virginia has one of the best educational savings vehicles in the country in terms of its the investment options that it offers. The expenses are extremely low. It is easy to access via the website. They have great customer service. It is widely regarded in the industry literature of one of the better savings vehicles for or postgraduate work after high school. So take advantage of it, and also the owner of a 529 college plan in Virginia gets a Virginia state tax deduction of up to $4,000 a year. Subject to your contributions to the plan. As long as you contribute at least $4,000 to the plan in the calendar year, you can deduct that from your Virginia state income taxes. If you contribute more than $4,000 then you can carry that forward. So example, if you contribute $10,000 in one calendar year, you can deduct $4,000 that year, $4,000 the next year, and $2,000 on the final year, until the contribution deduction is entirely used up again. That’s a Virginia state income tax deduction.

Financial Regret #6: Bad Financial Investments

Kevin Zywna, Wealthway Financial Advisors 

Tonight we’re talking about American’s top financial regrets of 2023. And I’m giving you some advice and tips on how to avoid them and stay out of regret in 2024. First, we’re going down the list from smallest amount of regret to largest regret, we didn’t earn enough at 3% of the population, save too little for children’s education, another 3%. Now we’re on to number six made bad financial investments. Another big regret of 2023, 5% of those surveyed said they made bad financial investments. I find that to be rather low. We think that based on what I see behind the curtain and what I am aware of through industry, literature and so forth, there are a lot of bad financial investments that are made.

Avoid Financial Regret #6: Use Investment Vehicles Properly

Sometimes it’s not the investment itself, it’s not the vehicle so much. It’s how the vehicle gets used. An S&P 500 mutual fund or exchange traded fund is neither a good nor bad investment. It depends on how you use it. And so for most people an S&P 500 index fund is an excellent addition to a broad based diversified portfolio. However, if you try to, I don’t know day trade or week trade or even monthly trade, your S&P 500 exchange traded funds, no, then then now you’re not using it right and you turn the odds of success against you by frequent trading of a legitimate investment vehicle. So how we use investments sometimes usually has to do more with our success with that investment than the actual investment itself. 5% of the population thought they made bad financial investments last year and they regret that so this year, do your research. Make sure you generally buy and hold for the long term. That’s the purpose of common stocks common investment vehicles, and turn the odds of success in your favor.

Financial Regret #5: Buying Too Much Property/Real Estate

Okay, down to number five now, number five. Oh, buying too much property. Yes, this is a good 1/5 most common regret is less about what investors failed to do, and more about what they did wrong. 6% of Americans said that they bought more real estate than they could afford. And that was their top regret in 2023 to 6% of the population. But too much house is not uncommon. I think everybody feels like they buy too much house when they buy their first house, like buying your first house feels virtually impossible. There’s no way I’ve scraped together every single penny I can possibly find to get a down payment. And then I have to pay a mortgage that is almost twice what I was paying in rent. I don’t know how I’m going to survive. I can’t, there’s no money for food or groceries or, gas in the car or what have you. But we do it. A majority of the population does it. Pulls together the downpayment. There are programs available to help people get started on their first home. We do it, we buy that first home. And then after we pull off the miracle of being able to stay in the home, after a couple years of making our payments on time, then guess what? Then we want to upgrade. We want to get a bigger house because we get kids, we need more room, want a better neighborhood, want to be closer to better schools. So then we buy more house and then we buy more house and we buy more house until we realize that probably we bought more house than we actually need to live comfortably. And especially then when the kids leave the nest, what are we going to do with five bedrooms and, you know, a massive TV room and living room and 5000 square feet and all that stuff when it’s just down to the two of us again. So, not uncommon people buy more house than they need, at some point. And with a bigger house comes a bigger mortgage comes a bigger expense in your homeowners insurance, and comes with larger property taxes, as well. And it comes with larger maintenance costs. So just buying the house is just getting started in terms of expenses. And all those expenses, get redirected, of course from other vehicles or avenues that can potentially grow your net worth faster over time.

Avoid Financial Regret #5: Be Mindful Of Not Over Buying A House & Know The Risks Of A Rental Property

Now certainly Buying a house is not the worst thing in the world to do is the way how the majority of Americans build net worth in this country. By buying on leverage, essentially buying with debt, a mortgage property, paying that debt slowly over time, enjoying some appreciation in the property value over time, eventually selling, unlocking that equity, turning it into liquid cash that can then be reinvested. And that is how the bulk of Americans build net worth in this country at this point in time. But it’s also not the best way to build net worth over time. Real estate, on average grows across the country at about the rate of inflation. So it’s just keeping pace with the cost of living. Now, I know all the markets are different, all the neighborhoods are different. Streets can be different, you know, and houses can grow faster than the rate of inflation over time and do in certain pockets. But on average, across the nation, about the rate of inflation. And so one of the things we have in the profession is you can’t eat your house. Right. So while a house has value, it’s an asset, it’s real. And it counts on your balance sheet. So it’s part of your net worth, which is shorthand for your wealth, all that counts, you can’t really break off a shingle and you know, throw it on the grill. You’ve got to go through some financial gymnastics to pull the equity out of the house either by selling the house outright, or getting a home equity line of credit, or getting a second mortgage, or refinancing your first mortgage and pulling additional equity out and then then repaying back that first mortgage. You’ve got to go through some expensive, time consuming, relatively complicated gymnastics in order to get that equity out. So be careful about buying too much house. That’s not really the biggest mistake we see when it comes to real estate. I would say the biggest mistake we see is that people try to do a one off rental property and that’s where experienced real estate purchasers and inexperienced landlords get into real big trouble because they don’t realize the additional costs and risks that come with having the occasional one off rental property. That’s where we see people, unfortunately, lose some serious money.

 

Kevin Zywna, Wealthway Financial Advisors 

Tonight we are talking about America’s top financial regrets of last year. And I’m giving you some advice on how to avoid them for this year. So let’s not make the same mistakes out there, people. We’ve got eight of them. We went down from top of the list, or the bottom of the list, the small ones, we had didn’t earn enough, save too little for children’s education, made bad financial investments, and then buying too much property. All right, those were the first four now we get into some of the biggies where more people started to have regret over their financial decisions in 2023.

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Financial Regret #4: Not Saving Enough For Emergencies

Number four, not saving enough for emergencies. 13% of the population had this as their largest regret of last year. And to this I say come on people. It can’t be listeners of this show. We bang the emergency fund drum as loud as we can. That is number one in terms of building a solid financial foundation. That must be done.

Avoid Financial Regret #4: Develop Solid Financial Foundation Starting With An Emergency Fund

An emergency fund is defined as three to six months of household expenses set away in a safe, secure, non-volatile liquid bank account. Yes, I know bank accounts are paying almost nothing, at least the basic savings and checking accounts are still paying almost nothing. That’s okay. That’s not the point of this money. This money is your safety and your security and your warm, comfortable blanket that you wrap around yourself every night when you go to sleep to know that you can keep the wolves at bay. If something big happens if there’s a car accident, if there’s a rush to the emergency room, if there’s a large medical bill, if there’s a tree that falls through the roof, if there’s an unexpected job loss, you have your own self-created safety net in the form of your emergency fund. Three to six months of household expenses. So your mortgage or your rent, your car payment, enough money for groceries and to pay the utilities and to keep gas in the car, the basic fundamentals of your daily living. So if let’s just say it’s $5,000 a month, you add all that up by $1,000 month, you need 15 to $30,000 set aside in a separate bank account, this is in your checking account, checking accounts or operational. It’s too easy to overspend when the money is in a savings account, it needs to be a separate I’m sorry, the checking account. It needs to be set aside in a separate savings account. Segregated from the checking account, so that there’s a demarcation line, and you mentally account for it as your emergency fund.

Okay, so that is a basic tenant of good financial management and the foundation on which financial success is built. It’s one of those areas that is kind of intertwined with all the others. Without an emergency fund it’s like building a house on a sand foundation. It would crumble when the first hurricane came through. You need to build a solid foundation to withstand life’s hurricanes. And they’re all out there. We know they are. Without the emergency fund, then that leads you to overextension and credit card debt, which is the most expensive form of debt, and then is typically an unhealthy form of debt. So you build your emergency fund, you eliminate bad debt with high interest rates, you make sure you get your employer’s match. And then you think about where the next dollar goes. Those are all the foundation of three legged stool: emergency fund, eliminate bad debt, get your employer match from your company retirement plan. If you do those three things. You’re building solid legs on your financial stool, that can withstand life hurricanes, not saving enough for emergencies. 13% of Americans had that regret.

Financial Regret #3: Credit Card Debt

Okay, number three on the list of laments of 2023, 15% of respondents said and guess what, that they had too much credit card debt. So there you go, four and three, tied right together, they have too much credit card debt, because they don’t have an emergency fund. Emergency fund steps in when you have a calamity, so you don’t have to go to credit card debt.

Avoid Financial Regret #3: Use Credit Cards Wisely, Out Of Convenience, Not Replacing An Emergency Fund

You use the credit cards for convenience, absolutely take advantage of any promotions offers, points, cashback, whenever you do that, that’s good too. But use the credit card so that you can pay it off in full each month. That’s the proper use of a credit card, you use it for the convenience. And I guess you know, the other perks and trinkets that go along with it. But that’s what use a credit card for once you can’t pay the balance off on a monthly basis and the debt starts to accumulate. You’re digging a financial hole that is going to be hard to get out of. So, 13% didn’t have enough for their emergency fund. 15% had too much credit card debt. Those two things are tied very closely together. So that’s like 28% of the population that didn’t have the three legs of a good financial foundation financial stool. So make sure that you’re using those credit cards wisely. They are important to have. I would say you know don’t avoid credit cards and don’t avoid using them because using them wisely builds your credit, gives you good credit, gives you good credit history, gives you a good credit score. So credit, it’s kind of like exercise. If you do too much of it, you hurt yourself and you can burn yourself out. And in your counterproductive, you don’t do any of it. Well you get lazy and soft and that’s not healthy either. So credit you kind of liken it exercise. You’ve got to have the right amount. You can’t do none, can’t do too much. Somewhere in the middle is the sweet spot. So, we definitely recommend that people have credit cards and use credit cards, but they use them responsibly and wisely over time to help build their credit and for the convenience factors that they offer all right,

Financial Regret #2: Not Taking Advantage Of High Interest Rates

Kevin Zywna, Wealthway Financial Advisors 

Tonight, talking about America’s top financial regrets of 2023 and How to Avoid Them. And 2024. We got eight of them working down the list from eight to number one. We’re down to the last two now. Number two, not taking advantage of higher interest rates. Yep, I can see that one, that would make sense. So since the summer of 2023, interest rates have been at their highest level in two decades. And that’s good for some financial vehicles such as certificates of deposit and high yield savings accounts. 16% of Americans surveyed said they regret not taking advantage of higher interest rates and yes that is true rate savings rates at banks outside of basic savings and basic change checking. At least at the mega banks outside of those have increased and we have seen rates In the threes, or fours, and at some point there, we were seeing some rates as high as 5%, in short term CDs. So those are six to 12 months, CDs, maybe as long as 18 months at one point. But we were seeing 5% savings rates on short term CDs, and some higher yielding savings account at the bank. So this is not your basic savings or checking account. They come in a variety of different names, but each bank kind of has their own version, a money market account, Super Saver account, high yield savings account, they’re called different things, but they’re all kind of similar. Usually, they come with a little bit more restriction, than your basic savings or checking account. So for example, you might have to deposit a minimum of say, $10,000, into the Super Saver account, and then you’re limited to maybe six withdrawals per month out of that account. But if you built up your emergency fund, and your other savings vehicles, or even this can be a good place for your emergency fund, then, beginning in summer of 2023, when inflation took off, interest rates followed in that direction, and increase in savings rates. And you can enjoy higher savings rates on your bank assets. So still completely safe, secure, relatively very liquid into those higher yielding either CDs, or money market savings accounts.

Avoid Financial Regret #2: Be Wise About Vehicles With Best Interest Returns

And we definitely encourage our clients to take a portion of their bank assets and move them into these vehicles. We’ve been doing that for about the past year now. So that they can take advantage of those higher savings rates that are available in some bank products. Now, having said that, you know, the money sitting in basic savings and basic Chase checking at most large mega bank institutions, we’re still seeing it like point 1% interest. And while that’s, you know, earning a lot of money on your transactional bank accounts is not the primary purpose.

It’s a lesson to all of us that money in the bank is typically going to, at best, keep pace with inflation, but usually fall behind inflation a little bit each year. So that most of the money most of the traditional bank products will cause you to lose purchasing power over time. Lose purchasing power over time, that means your money becomes worth less than goods and services over time by sitting in low yielding bank account vehicles. That is a that’s a hard concept for a lot of people to grasp. They see banks as safe and secure. And that money does not fluctuate in value very much. And all that is true, except when you compare it to the price of goods and services. And bank. Earnings typically do not keep pace. So you have a risk when you have too much money in the bank, too much of your net worth in the bank, you risk losing purchasing power, your standard of low living declines. Because your savings, your assets, can’t keep pace with the cost of goods and services. So your money buys less of them over time. So it’s important to have some money in the bank, emergency fund money, three to six months of household expenses. But too much beyond that, without good reason means that you are actually losing purchasing power over time, and that’s a real risk that most people aren’t even aware of.

Financial Regret #1: Not Saving Enough For Retirement

Number one, the biggest financial regret of 2023 and there’s no surprise here, at least for me is that 20% of the population regretted saving little to no money for retirement. A full 20% of respondents saved little to no money for retirement and pretty consistent with what we know inside the industry. You know only about a little bit over 50% Only a little bit over half of the population has any exposure to mainstream equities stocks, through either mutual funds exchange traded funds through their company retirement plan, through stock that their grandmother willed them or what have you. Only about half the population has any exposure to a true wealth creating vehicle like, like common stocks. Most people don’t understand it, don’t trust it, don’t want anything to do with the market and avoid it at all costs. And they don’t trust their employer. And they don’t believe that the retirement plan is in their best interest. And, and so they don’t contribute to the retirement plan. So they never get invested for long term growth. And days, turned into weeks turn into months turn into years, turn into half a lifetime. And then they wake up in their late 40s, early 50s. And realize that this idea of retirement that we have here in America is no longer theoretical. It’s practical, and it’s on the horizon. And they’re looking at it in like 10 to 15 years. And then all of a sudden, it gets real. And that’s when unfortunately most people start to seriously consider saving for retirement.

Avoid Financial Regret #1: Start Saving For Retirement As Soon As Possible

Here on the show and in our practice, try to get people to save as absolutely early as you possibly can. So 20% of Americans regretted not saving too little or no money for retirement 43% of people who responded the survey who are baby boomers chose this as their number one top regret savings for retirement people. You got to do it. There is another option for most people other than Social Security these days. All right, that’s all the time we have for today.

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