How to Overcome the Money Mistake Made by 65% of Americans

Have you ever made a mistake with your money?

Everyone makes mistakes, but some money mistakes can keep you working longer, stop you from retiring, or can even cause you to run out of money in retirement.

Recently Investor’s Business Daily did a survey and asked Americans about their worst money mistake.

Common mistakes were missing credit card payments, overdrawing checking, lack of insurance, lack of emergency savings, and mismanaging debt.

But there was one mistake that 65% of Americans said was their worst money mistake.

Can you guess what it was?

Yep, insufficient retirement savings.

But here’s the thing. I know you are saving as much money as you can. You may want to save more, but living is expensive.

You’re smart and may even have your savings automated such as having  putting extra money into savings or an emergency savings fund.

You are putting away all you can and hope to save even more in the future.

But there’s something important that most people are missing.

There are 3 parts to the Wealth Building Formula: Money, compounding and Time (McT).

Your savings represents the is the number of years you have until retirement. That is determined by your age since most people retire around age 65 (or sooner if possible).

The big variable is the “c” or compounding. What rate of return are you compounding your money at? It makes a HUGE difference to your retirement account.

For example:

If you invest $10,000 per year for retirement, but earn only 2%, after 20 years you’ll have $262,692 and after 30 years $431,908.

However, if you invested in the stock market and it averaged its historical rate of return of 10% annually, your $10,000 per year would grow to $697,299 after 20 years and $1,983,928 after 30 years!

That’s a huge difference.

So the question is, how are you investing? Is your money sitting in cash, or are you invested in low-cost index funds, aka Exchange Traded Funds (ETFs)?

They are a low cost, efficient way to earn higher rates of return while being diversified and reducing risk. ETFs are a great way to supplement the mutual funds in your 401K.

You can open a brokerage account (for example with Fidelity or Schwab) and invest beyond the limits of a 401k.

The better your investments do, the sooner you can retire and the more money you will have available to spend in retirement.

Getting your investments to work harder for you will make up for not saving enough. If that’s a mistake you think you are making, you can overcome it. The answer is better investing.

Linda P. Jones

https://lindapjones.com/podcasts