We all make mistakes. Additionally, people in their twenties are perhaps the most likely to make money-related mistakes. After all, they are dealing with the transition from student to worker and from dependency to self-sufficiency. The good news is that making big mistakes early will give you enough time to recover, so when you reach retirement age you’ll be able to enjoy the results of years of solid financial habits.
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Morris Armstrong, principal at Armstrong Financial Strategies, a registered investment advisory firm, learned that lesson the hard way. In an interview with GOBankingRates, Armstrong talked about the mistakes he made early on and what he did to turn things around.
Be complacent with money
“When I was in my 20s and 30s, I earned the equivalent of about $350,000 today. If he wanted something, he bought it and probably spent too much on eating out, lodging and other things that fed the ego,” Armstrong said.
Fortunately, Armstrong, who also operates as a registered tax agent through his other company, Morris Armstrong EA, had no debt other than his mortgage and had money to spend. The problem is that he did it inefficiently.
“When I was single, I didn’t really budget. I was never in danger of not being able to pay rent or buy food or anything within reason. She had some savings but not enough. “I just ignored my future.”
See: How much does the average middle-class person have saved?
Being unrealistic about the future
Armstrong eventually began to take his finances more seriously, and when he entered the field of finance, he was working with a financial planner. What he didn’t realize at the time was that his plan was unrealistic.
“Optimistic assumptions were made and the impact of leaving a job or getting divorced was never discussed. “Any plan that would have been made would have given me a six-figure pension.”
Armstrong said planning has evolved since then. Discussions about job loss and the possibility of divorce are common, and he incorporates them into his own counseling practice.
“Life changes, so plans need to be reviewed and adapted,” he said.
Avoid difficult conversations about money
Armstrong’s unrealistic financial plan revealed another mistake: entering into marriage without considering financial compatibility.
“I don’t blame my spouse, but I think people in relationships should talk openly about finances and strive to be on the same page.”
Not investing for the long term
“I should have easily been able to save 30% of my salary with little effort,” Armstrong said. This is money you now wish you had invested for the long term, with an appropriate allocation to stocks.
But looking back, Armstrong realizes those were different times.
“401(k) plans were not available back then and many companies offered pensions. “Unfortunately, vesting wasn’t as lenient then as it is today, but I stayed at a bank for five years and had a pension.”
And he built a stock portfolio in the mid-’90s, but his divorce and the dot-com bubble cut his assets in half.
Overcoming your mistakes
Michael Gilmore, co-founder of the Money Awareness and Inclusion Awards, a global organization that recognizes people and organizations having the greatest impact on financial education and inclusion, also admitted that he made financial mistakes when he was younger.
“In fact, I still do,” Gilmore told GOBankingRates. “Making mistakes is a sign that you are still trying.
“The biggest mistake I made, in fact, was the fact that I didn’t invest until I was thirty, because I was too afraid of making mistakes.”
Gilmore said one of the biggest mistakes people make is doing nothing out of fear, based on the mistaken assumption that all financial mistakes are terminal. And that is due to the lack of financial knowledge.
The best way to improve literacy in your 20s, Gilmore said, is to remember that “we all make mistakes, but the most important thing we can learn from them is that we can overcome them. In fact, we have to.”
Armstrong would agree.
“Although there was nothing I could do about losing assets in the divorce, I have been practicing better money habits, spending and investing wisely for the past twenty years and have achieved my financial goals. I could retire comfortably if I could answer the question I ask all my clients: ‘What are you going to do with the 40 hours of time you earn?’ I am working on it!”
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This article originally appeared on GOBankingRates.com: I’m Retirement Age: These Are the Money Mistakes I’m Glad I Made When I Was Young
