Financial regrets? You've had a few, no doubt. And you're not alone.
According to a recent Merrill Edge survey, there are about 25 million American households that have between $50,000 and $250,000 in investable assets outside of.
That's aof people with an awful of to invest -- and to lose.
The report looks at what financial regrets this group has had. And while not all of us have quite that much money to invest, I believe that the vast majority of us would share at least a few of these regrets -- if not all of them.
Let's take a look...
The top three regrets were as follows:
1. Not getting an early start on 401(k) saving, and not contributing more
2. Making high-risk
3. Not creating a financial plan earlier
What's interesting about the top three? They're intertwined.
Someone who doesn't start contributing to a 401(k) earlier, or just forks over small sums in their 20s and 30s, is just the type of person who is going to be tempted to swing for the fences in his 40s to make up for lost time. The earlier you start, the less inclined you might be to make high-risk.
And if you've yet to create a financial plan, it's obviously a whole lot easier to be either unaware of bad habits (shortchanging your retirement savings) or letting your emotions or greed get the best of you and pull you into a very high-risk .
Here are some workarounds to overcoming your biggest financial regrets.
Fix No. 1: Get More Out Of Your 401(k).
You get no gold stars for merely contributing to your 401(k). What really matters is how much you're forking over from each paycheck. A decent rule of thumb is that you want to set aside at least 10 percent of your pre-tax salary into the retirement fund.
How are you doing?
If you've started at a new job in the past few years, there's a good chance your employer automatically enrolled you in the retirement plan and set a default rate of 3 percent or so of your salary.
That is woefully low. It's time to up your contribution rate.
Sure, maybe it's not practical to double or triple your contribution rate in one quick move. But delaying is not aneither.
Today's the day you get past this big regret. Start by upping your contribution rate by 2 percentage points.
The next step is to commit to raise your contribution rate by at least 1 percentage point every. A recent Deloitte survey reports that more than half of firms now an automatic-escalation feature for their 401(k) plans that boost your contribution rate on a set date.
The only problem is that most of the plans require you to sign up for this feature, rather than just making it a default setting for the plan. Check with your 401(k) to see if you can enroll in an auto-escalation plan. If not, you need toa reminder in your calendar to do it yourself.
Now if you're really heavy into the 401(k) regret and want to turbocharge your retirement investing, the maximum you can contribute in 2013 is $17,500 if you're under 50. If you're 50 or older, your contribution limit is a sizable $23,000 this year.
Fix No. 2: Devise A Long-Term Financial Plan.
It's taken the increasingly influential field of behavioral finance to explain a vexing truth of 21st-century personal finance: Just about everything in our brain is hardwired against making smart decisions for our long-term security.
We react to what is right in front of us, positive or negative.
Extrapolating out to what we want in our life three or four decades from now, and making the trade-offs today to reach those goals, is insanely difficult.
That's where having a written plan can pay off big-time. This is one area where it can pay to work with a trusted financial planner to carefully walk through all the moving parts. Plenty of planners devise a plan with you as a one-off for a set fee, if you're not ready to sign on for an ongoing relationship. That said, if you're suffering from financial regrets, hiring a pro makes a ton of sense.
The real value of a trusted pro is to keep you committed to your plan.
Fix No. 3: Commit To That Plan.
Professor Shlomo Benartzi, the director of the Allianz Center for Behavioral Finance at UCLA, suggests you consider the Ulysses contract.
Just like Ulysses was able to ignore the tempting songs of the Sirens thanks to his well-considered planning, you and your trusted advisor can both commit to tie your finances to the mast and avoid tragic temptations during periods of volatility.
You can find a sample "Commitment Memorandum" -- aka a Ulysses contract -- at the Allianz website.
The key points you and a trusted financial pro both sign on to:
1. Hold fast to a allocation model. We'll review periodically, but we're not going to allow in-the-moment emotions during volatile times to pull us off our long-term course. (That help us steer clear of high-risk .)
2. Embrace volatility by ignoring it. We'll both resist the knee-jerk temptation to sell when the markets drop 25 percent or buy when the markets rise 25 percent in a short period.
3. Either of us can back out, but we have to it into writing. Deviating from the plan only be allowed after slow and thoughtful consideration. No one-word email with 'sell' in the subject line when the market is doing one of its periodic tank jobs suffice. We commit to spelling out the rationale of how making a move today still keep you on pace to meet your long-term goals. If that's hard to explain, well, maybe it's the wrong move.