We all mishandle our money from time to time — whether it’s an impulse buy, a forgotten bill or just poor planning.
But there’s a big difference between going shopping and realizing you shouldn’t have — and making a serious financial mistake that can haunt you for years, maybe even a lifetime.
So to help you avoid making some seriously bad money decisions — and keep your financial life on track in 2018 — we’ve put together a list of some mistakes that come with the biggest consequences.
1. Putting off saving for the future
It can be difficult to start saving for retirement when you’re young and probably not making much money — especially when retirement seems like a lifetime away.
But the truth is, the earlier you start, the better. Not only does the money you put away have more time to grow, but implementing savings habits early on allows you to really start to see the power of investing.
For example, if you start contributing to your retirement accounts at age 21, your future nest egg could actually be worth more down the road than if you start contributing at age 40 — even if the monthly contributions are higher when you’re older.
Here’s why: compound interest. Compound interest is an extremely powerful force that allows investors to earn exponentially larger gains on their money over time. Here’s an example: You invest $1,000 today and earn an annual 5% gain, so $50. That $50 is added to the principal amount of your investment, and then next year, you earn a 5% gain on $1,050, so you earn $102.50. And so on…
So the earlier you start putting money way in a retirement account, the more time it has to earn you a lot more money! But even if you’re older and haven’t started saving for the future, it’s not too late!
How to start saving for retirement if you’re saving nothing right now:
If you feel like you have no extra money to spare, start by contributing just 1% to your 401(k). The money will come out of your paycheck before you even see it in your account — and 1% is such a small amount that you won’t even miss it. Then every six months, bump that up by another 1%. Then in five years, you’ll be saving 10% of your income toward retirement — and the increases are so small that you’ll be able to adjust your budget over time.