I’m Retirement Age: These Are the Money Mistakes I’m Glad I Made When I Was Young
Written by
Daria Uhlig
Edited by
Molly Sullivan
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Everyone makes mistakes, and people in their 20s are perhaps the most prone to mistakes involving money. After all, they’re grappling with the transition from student to worker, and from dependence to self-support. The good news is that making your big mistakes early gives you plenty of time to recover so that by the time you reach retirement age, you’ll be enjoying the results of years of sound financial habits.
Morris Armstrong, principal at Armstrong Financial Strategies, a registered investment advisor firm, learned that lesson the hard way. In an interview with GOBankingRates, Armstrong discussed the mistakes he made early on and what he did to turn things around.
Being Complacent About Money
“When I was in my late 20s and 30s, I was making the equivalent of about $350,000 today. If I wanted something, I bought it and probably spent way too much on eating out, housing and other things which fed the ego,” Armstrong said.
Fortunately, Armstrong, who also operates as an enrolled tax agent through his other company, Morris Armstrong EA, had no debt other than his mortgage, and he had the money to spend. The problem is that he did so inefficiently.
“When I was single, I did not really budget. I was never in danger of not being able to pay the rent or buy groceries or anything within reason. I did have some savings but not enough. I simply ignored the future of me.”
Being Unrealistic About the Future
Armstrong eventually began taking his finances more seriously, and by the time he entered the finance field, he was working with a financial planner. What he didn’t realize at the time was that his plan was unrealistic.
“Rosy assumptions were made, and the impact of leaving a job or getting a divorce were never spoken about. Any plan that was done would have shown me getting a six-figure pension.”
Armstrong said planning has evolved since then. Discussions about job loss and the possibility of divorce are commonplace, and he incorporates them into his own advisory practice.
“Life changes, and so plans need to be reviewed and adaptable,” he said.
Avoiding the Tough Conversations About Money
Armstrong’s unrealistic financial plan revealed another error, which was entering into a marriage without considering financial compatibility.
“I am not blaming my former spouse, but I think that people in a relationship need to discuss finances openly and make efforts 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. That’s money he now wishes he’d invested for the long term, with an appropriate allocation to equities.
But looking back, Armstrong realizes that that was a different time.
“The 401(k) plans were not readily available back then, and many companies offered pensions. Unfortunately, vesting was not as lenient then as it is today, but I did remain at one bank for five years and have a pension.”
And he did build a portfolio of equities in the mid-’90s, but his divorce and the dot-com bubble slashed his assets in half.
Overcoming Your Mistakes
Michael Gilmore, co-founder of the Money Awareness and Inclusion Awards, a global organization that recognizes the individuals and organizations having the greatest impact on financial literacy and inclusion, also admitted that he made money mistakes when he was younger.
“Still do, in fact,” 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 in my thirties — because I was too afraid of making mistakes.”
Gilmore said that one of the biggest mistakes people make is doing nothing out of fear based on the faulty assumption that all money mistakes are terminal. And that stems from a lack of financial literacy.
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. We have to, in fact.”
Armstrong would agree.
“While I could not do anything about losing the assets in divorce, I have been practicing better money habits, appropriate spending and investing for the past twenty plus years and have achieved my financial goals. I could retire comfortably if only I were able to answer the question I ask all my clients: ‘What are you going to do with the 40 hours of time which you gain?’ I am working on that!”
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