Article

Common Financial Pitfalls by Decade

Walking on trail

Money habits naturally change over time. Young twenty-somethings are unlikely to spend their paychecks in the same way as mid-life earners planning on early retirement. Whether you're like the nearly 40% of millennials whom a Credit Karma/Qualtrics study found have fallen victim to FOMO spending , or you classify yourself as an intermittent saver, almost every income earner hopes to avoid a life filled with financial stress and uncertainty.

The journey to financial security often contains unwelcome surprises and distractions. But, if you know what to watch out for along the way, you'll have a better chance of avoiding the pebbles in your path that could lead to debt, insufficient savings, and poor credit. Review this list of money pitfalls, sorted by decade, and discover what you can do to avoid making these common financial mistakes.

In Your 20s

Borrowing Too Much

Whether it's a college education at an ivy league school or a first car, adults in their 20s often want it now and will incur debt to obtain it. But, without a plan to pay for tuition or other expenses, many young adults end up with more debt than they can handle.

If you graduate from college with the average student loan debt of $32,731, you can expect to spend $300+ per month for at least ten years to bring the balance to zero. Starting your adult life with a heavy debt load can put you behind the eight ball financially.

Avoid This Pitfall

Before you sign that student loan promissory note, look for funding alternatives that include :

Speak with your financial aid office to uncover additional options. Or, be patient and save until you can afford what you desire.

Skipping Savings Altogether

After you've landed your first full-time job, you might feel rich. Earning more than you've ever made in your life is an exhilarating feeling. That is until the bills come due. After rent, utilities, and a car payment, you might be left with just enough money for entertainment. The last thing you're likely thinking about is saving for the future. This can be a colossal mistake since time is on your side when it comes to saving.

Avoid This Pitfall

Pay yourself first. If your employer offers a matching retirement saving plan, i.e., 401k, invest at least up to the matching amount. Your future self will thank you for your planning wisdom. Saying no to an employer match is like saying no to free money.

In Your 30s

Excessive Credit Card Spending

At this point, you've likely added several credit cards to your financial arsenal. Due to their convenience, you might use them to buy what you want when you want it while ignoring the price tag. A recent job promotion justifies the uptick in spending. But if you look around, you might notice that the items you're buying are fun for a brief time, but they still cost you long after the party's over. For example, when you no longer have an interest in using your ATV, RV, or boat, you still have to make loan payments and pay for storage and maintenance costs.

Avoid This Pitfall

Save for significant expenses after you've allocated funds for retirement savings and built an emergency savings nest egg. When you're ready for a financial splurge, look for alternative ways to have the same experience by renting rather than buying, using coupons, or splitting the cost with other people.

In Your 40s

Attempting to Meet Everyone's Needs

During this time of life, you might feel you have to choose between the financial needs of growing children with college expenses on the horizon, aging parents who need additional care, and your retirement account that isn't as hefty as you'd hoped. To make matters worse, you might feel pressured to withdraw money from your retirement savings to help your children and parents. This financial squeeze could devastate your financial future.

Avoid This Pitfall

Speak with a qualified financial advisor about your options before you touch your retirement accounts. You'll want to understand the risk and penalties associated with early withdrawals and explore alternative ways to meet the demands of family.

In Your 50s

Being More Than a Knowledge Bank

If your financial life has been smooth sailing until this point - congratulations! It's also possible that you've recovered from a few financial missteps in your early years and are more financially stable in your 50s. Your life experience also puts you in a position as the "go-to" person in the family for financial advice. While being a knowledgeable resource is a beautiful thing, being known as the person who'll always lend money or cosign can do more harm than good. You don't want to jeopardize what's taken years to accomplish.

Avoid This Pitfall

Establish boundaries and stick to them. Turn to your experience, not your good credit or bank account, to help friends and family members in their time of need. Don't forget that there might be wedding expenses and retirement plans just around the corner.

In Your 60s

Underestimating Future Expenses

Do you have enough money to retire at age 67? What happens if you access Social Security benefits at age 62? How will you pay for healthcare in retirement? The answers to these questions are best pondered at each life stage, but many people may wait until these questions are at their door before giving them the attention they deserve. While numbers vary by source, these answers will depend on how much you've saved and your desired retirement lifestyle.

Note that healthcare is one of the most underestimated costs of retirement. Fidelity Investments estimates that married couples age 65+ who retire today will need $285,000 to cover healthcare costs alone.

Avoid This Pitfall

Review your retirement portfolio early and often. Invite a second set of eyes to review your finances to ensure proper diversification for your life stage by scheduling a no-cost, no-obligation consultation with a qualified Investment Services professional. They can discuss your specific financial situation and help identify ways you can better prepare for your retirement.

The way you handle money during each decade can either cause you to stumble or pave the way for a bright future. If you've made money mistakes that make it challenging to regain financial footing, we might be able to help.

Don’t hesitate to give us a call at 800-444-4816 to speak with a Member Advocate about your options.