Nearly 60% of Americans say they're living paycheck to paycheck, according to a survey from Charles Schwab. When money is tight, you might be mostly focused on paying your bills and keeping your head above water financially rather than saving for the future or thinking about your long-term goals.
However, there are certain mistakes that could cause a lifetime of financial pain. Although these money moves may not seem like they'd make a significant long-term impact, they can cause serious regrets down the road.
1. Not saving for retirement earlier
It's easy to put off saving for retirement for another day, especially when you still have decades left before you can even think about retiring. In fact, 42% of workers say they'd rather not concern themselves with saving until they get closer to retirement age, according to a report from the Transamerica Center for Retirement Studies.
However, the longer you wait to get started saving, the harder it becomes to save as much as you need. Say, for example, you want to save $750,000 by age 65 -- a realistic goal, considering retirement is becoming more and more expensive. If you start saving at age 30, you'd need to save roughly $450 per month, assuming you're earning a 7% annual rate of return on your investments. But if you wait until age 40 to begin saving, you'll need to sock away just under $1,000 per month to reach your goal, all other factors remaining the same.
Some workers may put off retirement saving thinking they'll simply be able to rely on Social Security benefits to cover all their expenses. However, the average beneficiary receives only $1,471 per month, and there's also the possibility that benefits could be reduced in the next few decades. So unless you're willing to make some serious financial sacrifices later in life, it's a good idea to build a robust retirement fund now so you're not left relying entirely on your benefits to make ends meet.
2. Taking money out of your retirement fund early
More than half (52%) of Americans have raided their retirement funds at some point, according to a survey from MagnifyMoney, and some of the most common reasons include paying down debt, student loans, and medical expenses.
It can be tempting to withdraw from your retirement fund when you don't have enough cash to cover all your expenses, especially when you're decades from retirement and don't need the money anytime soon. However, taking money from your retirement fund before you retire has serious consequences, and it can make it harder to save as much as you need.
If you're saving in a 401(k) or traditional IRA, you could be subject to a 10% penalty fee if you withdraw your money before age 59 1/2 and you'll also have to pay income taxes on the amount you withdraw. But there are also long-term consequences to making even relatively small early withdrawals from your savings.
When you stash money in your retirement fund, it's able to grow quickly thanks to compound interest -- which is basically when you earn interest on your interest. But when you withdraw money, you're taking a step back, making it harder for your savings to grow. Over time, you could be missing out on thousands of dollars in potential earnings on your investments.
3. Not establishing an emergency fund
A solid emergency fund helps you avoid situations where you feel like you have no choice but to take money from your retirement savings. It can also help you avoid digging yourself into debt, because if an unexpected expense pops up, you'll have money set aside specifically for those types of costs.
Aim to save enough to cover three to six months' worth of expenses, so if you lose your job, are slapped with a major medical bill, or the dog needs emergency surgery, you won't need to raid your retirement savings or rack up credit card debt to cover it.
Of course, saving thousands of dollars in an emergency fund is easier said than done, especially if you're strapped for cash. Try not to get overwhelmed by your goal, and instead take it one day at a time. Even if you're only able to save a few dollars per week, that's better than nothing. Saving anything at all in an emergency fund equates to less cash that will need to come from your retirement fund or credit card if you're faced with an unexpected expense.
Everyone wants to make the best financial decisions possible, but sometimes, you may not realize you're making these harmful money moves until it's too late. While nobody has all the right answers when it comes to how to best manage your money, avoiding these mistakes can help you live a life without financial regrets.