By: Treasurer David McRae
It’s often been said that you can learn more from another person’s failures than from their successes – and oh, how true that is! Today, I’d like to dig through three common financial missteps that we can all learn a little from.
SAVING TOO LATE IN LIFE: Ask almost any retiree if they would have done one financial thing differently in their youth, and I can almost guarantee they’ll tell you they should have started saving earlier. Consider this – if you save $1.00 at age 20, it will be worth $5.84 by age 65, according to calculations by Vanguard. If you invest that same $1.00 at age 55, it will be worth just $1.48 by age 65. Let’s extrapolate that into larger savings. If you save $375 per month over a 45-year career, you’ll be a millionaire at retirement. When talking about early investing, a little can go a long way.
NOT HAVING A PLAN: I get it – financial planning can seem complicated and overwhelming. After all, it’s hard enough to know what you’ll make for dinner tonight; let alone how you’ll want to live 4 decades from now! Nonetheless, there are resources available to create easy-to-follow plans. We have some of these resources posted for you at Treasury.MS.gov/FinancialEducation. I challenge you to create a rough outline plan today!
USING YOUR RETIREMENT SAVINGS FOR OTHER THINGS: As you see those retirement savings grow, it can be tempting to dip into them here and there (maybe you just need a little extra to upgrade your kitchen or your car). But indulging in these savings too early can create problems. In addition to incurring early withdrawal fees, you’ll see your principal fall, meaning interest will compound at a slower rate, stunting your account’s growth and potentially delaying retirement.
Everyone will go on their own financial wellness journey. We’ll each do a lot of things right, but inevitably, we will each make a mistake or two along the way. The goal should always be to avoid the largest potholes when possible and minimize the damage when we misstep.
Take time this week to consider some of the financial lessons you’ve learned. Are you bound to repeat any previous mistakes? Have you made any decisions that put you on a better path going forward?
Wherever you are on your road to retirement, take a pitstop at Treasury.MS.gov/FinancialEducation today for more resources and information.
Mississippi Treasurer David McRae is the 55th Treasurer for the State of Mississippi. In this role, he helps manage the state’s cash flow, oversees College Savings Mississippi, and has returned nearly $75 million in unclaimed money to Mississippians. For more information, visit Treasury.MS.gov.