[00:01] most popular money mistakes everyone makes. And each mistake is categorized by age. So, we're going to be discussing the most common money mistakes each age bracket makes. So, that's going to be the 20s, 30s, 40s, 50s, and 60s. So,
[00:15] first mistake in your 20s that you're going to make, which is still very common, is just not investing early enough. If a 25year-old started investing $200 per month, assuming an 8% return, by the time they are 65, they
[00:28] would have a nest egg worth $622,000. But if they wait until 35 to start investing $200 a month, even with the same 8% return, they would end up with less than half of that. So $287,000 by the time they are 65. So by just simply
[00:43] waiting 10 years to start, they'd have $335,000 less even though they only $335,000 less even though they only invested $24,000 less. Those first 10 years represent more than half of the final value because that money has had
[00:55] second mistake in your 20s you will make is not establishing credit. I was actually at a wedding over the weekend where I met a woman who was 29 years old with no credit score. She's having a hard time renting a new apartment and
[01:08] that she's been using a debit card her in any debt whatsoever. But the con is that the lack of a credit score is now way. What you can do instead at a young age is just get a starter credit card,
[01:22] card, and just automate the payments to avoid any late payments. Since a lot of your credit score is driven by how often you pay on time, just by doing this credit score in maybe 6 to 12 to 18 months. The third mistake you make in
[01:36] your 20s is buying a new car when you don't need it. Edmonds.com now reports that the average monthly car payment is $748 per month for new cars and $532 per car, you might be overpaying for it because a car incurs a lot of
[01:52] depreciation when you first get it on the front end, and you could be putting if you can't afford the payments. I would stick to the 2410 or the 2510 rule of car buying that states that you should put 20% down on a car. Finance
[02:06] the car for no more than four to 5 years and that your monthly payments should not exceed 10% of your gross monthly income. If you can follow this rule, your car is then safe in terms of affordability. The fourth common mistake
[02:18] in your 20s is slightly controversial, but it's moving out too soon of your to have this option of staying at home with their parents, but if you do have the option, I would try to delay the moment in which you move out completely.
[02:31] Oftentimes, I'll see people in their 20s without an emergency fund and without into an apartment that they can barely afford. The average age which people move out of their parents' homes is now between 24 and 27. But if you can delay
[02:44] it maybe just even a year or two years and really save up a little bit of extra way, especially considering now that the median rent in the US is now $1631 per month. And the fifth mistake I see a lot of 20somes make is just not budgeting at
[02:58] all. According to debt.com, 69% of people are living paycheck to paycheck live paycheck to paycheck, it's really easy to fall into debt because you might have to take out a personal loan just to cover your normal expenses, especially
[03:13] Now, if you are in debt, there is some good news because 84% of people said stay out of debt. So, if you don't have a budget, I would at least create a monthly average expenses and figure out what category you are spending the most
[03:28] help with budgeting, you want to check out some of the videos on my channel. I description. So, those were some basic mistakes that young people make, but as you move up to the decade of the 30s, the mistakes start to become more
[03:41] lifestyle oriented. The first mistake I see that people in their 30s often make is splurging on their wedding. The average cost for a Gen Z, millennial, and Gen X wedding are 27K, 38K, and 23K,
[03:54] respectively. If you live in a more expensive cost of living area, then I higher. The biggest cost to factor in for a wedding are usually the number of guests, the venue, and whether or not to invite your creepy uncle because that
[04:06] could just cost you a lifetime of therapy. Here are the average prices of wedding features according to a popular website, Zola, for a wedding size of 100 guests. You can see that most people spend a lot of money on their venue as
[04:18] that this does not include the cost of an engagement ring. When it comes to spend an arm and a leg, really think twice about who you invite to it. decide more money on and really what categories you don't really need to splurge on. You
[04:32] can even get creative with ways to save, like using a grandparents backyard as a venue. A common guideline is to spend no more than 20% of your combined annual income on a wedding. So, let's say you and your spouse combine and you guys
[04:44] make 150k per year, try to target $30,000 for your wedding or less. The your 30s is neglecting emergency funds. So, if you don't have 3 to 6 months decade, I think you are making a mistake. You should really focus on
[04:59] buffing that up as your number one priority if you haven't already. The buying too much of a house and living beyond your means. So, when it comes to buying a house, a lot of people forget the hidden costs of owning a single
[05:11] family home. According to a new bank rate study, quote, "The average annual cost of owning and maintaining a single family home in the US is now more than $21,000 per year." And you can see that this is broken down here by category. So
[05:23] what your home ownership costs are actually going to look like before even purchases of your life. The fourth mistake I see people in their 30s making is that they get way too comfortable with debt. In your 30s, since you're in
[05:36] decade to really start ramping up your net worth and the last thing you want existing loans that are slowing your compounding of wealth. In addition, in your personal life will start to intersect. You're starting to get more
[05:50] responsibilities at work. Your family is growing either by the addition of having a kid or two or by having pets. And also, you might have to take care of had to do in your 20s. So, that might mean with all these things combined, you
[06:04] However, don't let debt derail your compounding. And if you do have to take it on, make sure you have a plan to get out of it ASAP. And the fifth mistake I see people in their 30s making is lifestyle creep. It's tempting to
[06:17] grows, but if you're overspending on cars, homes, or luxury items, this can financial freedom. A good rule of thumb when it comes to increasing your lifestyle is to think about the cost you're debating over a longer term time
[06:31] horizon. If you want to drive a nicer car, think about how much more that will cost you, not just this year, but over the next 5 or 10 years total. I find makes me think twice about that expensive upgrade. Okay, moving right
[06:44] along into the decade of the 40s. Now, you're likely established, have a family, and own a home. The first money mistake I see people in their 40s making retirement. Fidelity recommends having between 3x and 6x your salary between
[06:57] the ages of 40 and 50 saved for retirement. That means if you're the age of 40 and you make $100,000 per year, you should have at least $300,000 at age 40 save for retirement. Another quick rule of thumb to use is the 4% rule that
[07:10] states that you can safely withdraw 4% of your total balance each year in theoretically, you will never run out of money. So, if your nest egg was a million dollars, you can safely withdraw 40k or 4% of that balance every year in
[07:23] retirement. You can use this 4% rule to work backwards and see what your total nest egg you should be targeting should be. So, do not ignore retirement still have enough time to get your balance really compounding for you. The
[07:36] next money mistake in this decade is not having an estate plan. So, if you have dependent that rely on you and you have assets that need to be distributed, you probably should have an estate plan or at least start one. The major components
[07:48] living will and a healthcare power of attorney. These are the documents that something were to happen to you and can often even be done really quickly in place so that your family isn't stressed if something were to happen to
[08:03] their 40s making is either being uninsured or underinsured. There are two focus on in this decade, and that's going to be life insurance and life insurance, a common rule of thumb is to have coverage that's 10 to 15
[08:18] times your annual income. So, if you make $100,000 per year, you should be targeting between 1 to $ 1.5 million in coverage. Now, that might sound like a quite affordable, especially if you're healthy. I would probably stay away from
[08:31] is generally not worth it. I've talked about this in some other videos before, but whole life insurance seems to be marketed more for the benefit of the Now, disability insurance is equally important, but often overlooked. If you
[08:45] can't work due to an injury or illness, disability insurance will replace a portion of your income. It's typically 60 to 70% of your salary, and most already. But I think it's also worth looking at yourself if you don't have
[08:58] this benefit. The fourth mistake in your 40s you could easily make is careless spending. Quote, "The average debt in America is over $105,000 across mortgages, auto loans, student loans, and credit cards, with debt peaking
[09:11] between the ages of 40 and 49. This mistake is kind of like the lifestyle re-emphasize here that you don't want to get carried away with spending on things that are unnecessary for your life. Your 40s will be a time you might come into
[09:24] your career or that you're past a lot of bigger expenses. is now so you have more money to spend. This is still a time you can stay disciplined and don't get into regret later. And the fifth mistake in your 40s that's very common is trying to
[09:38] make up for lost time with shortcuts, especially if you got a late start. It financially literate. Maybe you're watching these videos and you realize, "Oh man, I am really behind on my retirement planning." As a result, you
[09:50] see a lot of your peers, they're trying to chase hot stocks, get into complex real estate deals, or they might get into speculative trading, trying to make just want to say, don't do this. You want to just stick with broad-based
[10:03] and do the boring stuff because that will actually get you the results that you want. I know it might not be as fast as you want and perhaps you're falling last thing I want to see you do is try to gamble or yolo your way to financial
[10:17] stability and then you end up losing it all getting into the decade of the 50s. mistakes that we really commonly see. The first mistake is dipping into your retirement funds too early. So, some people might be tempted to do this
[10:29] because they are in need of cash to buy something fancy like a second home, go on a nice vacation, or perhaps they just want to remodel their original home. But you do not want to do this. There is a 10% penalty on withdrawing money before
[10:41] you are 59 and a half in addition to income tax on the distribution if it's not within a Roth account. So, for example, if you're in the 22% tax bracket, an early withdrawal of $10,000 from your retirement account would
[10:54] result in $3,200 in taxes and penalties. I don't think that's worth it. The the stock market. Most people would conservative with your investments when you get slightly older in your 50s. And
[11:06] while that is true, you don't want to go just straight to 100% bond or fixed income allocations. I think you would still want some exposure to stocks because you still have 10, 15, maybe even 16 years left until retirement, and
[11:18] the upside that equities might provide people in their 50s making is still holding on to high interest rate debt in addition to their mortgage. It might be nice to pay off your mortgage, but if
[11:31] the interest rate on your mortgage is, say, 6% and you have other loans such as interest rates, you should probably cut those first. The 50s are an important financial life. And if you are still in
[11:44] your 60s a lot harder to retire comfortably because you might still be anxious about money or carrying around debt. So, make sure you ruthlessly go after the higher interest rate debt in your 50s. I think this also applies to
[11:57] going to be the cut off here because I want you to enter the 60s with zero debt whatsoever. The fourth mistake I see people in their 50s making is not taking advantage of any catch-up mechanisms with retirement plans. After the age of
[12:11] 50, you can usually contribute more money to your 401k than someone under your IRA. If you have the funds available to contribute to the max in that's a pretty good idea. You [snorts] want to max these out. And don't forget
[12:24] to take advantage of any employer matches you might also get. All right, decade of the 50s, but let's go right into the decade of the 60s now because this is the most important decade in my opinion. This is when you will retire.
[12:37] Big mistake number one in your 60s is not having a withdrawal strategy. You percentage of your nest egg you will be able to withdraw every single year. each year and how to adjust those withdrawals during when the market is up
[12:51] versus down, you're more likely to overspend early, which increases the life. You also have to account for rising costs like health care, inflation, and long-term care. So, your expenses could quickly outpace your
[13:03] income, especially if you don't have a strategy going into it. This is where I some of my videos on the 4% rule or even talk to a financial adviser in person if you want some more help on your specific situation. Here's an older graph, but
[13:16] generally sustainable in most markets since 1926. If you went with a 6% or 8% sustainable throughout history. Mistake number two I see people in their 60s
[13:28] withdrawing enough money when you retire because you fear running out of money. So, quote, "Recently published research by David Blanchett and Michael Frink found that retirees are withdrawing just 2.1% of their savings annually, far
[13:42] below the traditional 4% rule. That means a lot of people in their 60s are time with their family, or perhaps even a new hobby until it's way too late. Not to mention, a lot of people still pass away with a lot of money left in their
[13:55] retirement accounts. So, if our goal is to maximize the life that we live with the money that we do have, and if we've hit all of our targets financially, we should switch our mindsets from savers to spenders, especially in our 60s.
[14:07] Mistake number three in your 60s is claiming your Social Security benefits to claim Social Security benefits in America at the age of 62. But let's say you claim it at the age of 62, you actually get a reduced benefit amount of
[14:21] 70% of the benefit. If you wait until the full retirement age of 67, that entitles you to the full benefit, so 100%. And you've already worked 35 to 40 years in your lifetime. What's another five more to get that full 100% benefit?
[14:34] So, I hope that you can hold off until the age of 67 if you are able to. Mistake number four is not having a clear retirement vision. There was a they found that successful retirement planning involved planning fulfillment
[14:47] which led to better mental health, self-esteem and social activity in my opinion is that you should aim to have a plan when you retire of what working for 40 years. Work is often a
[15:00] people. And I will frequently see retirees retire, but then they don't get bored because they're sitting around all day and then what do they do? They Whether you have some sort of community you're a part of, a hobby you want to
[15:13] take part of, or even an organization you want to help run in your free time, you're retiring with some sort of vision and purpose. This will bring you a lot of fulfillment in your retirement years. And that will be more sustainable than
[15:26] and then you get bored. And mistake make is neglecting healthcare planning. This one's not the sexiest one out there, but you really want to understand your options for retirey health coverage
[15:39] supplemental insurance you might need. Medicare eligibility begins at the age of 65, but it doesn't cover everything. There are gaps in coverage like dental, vision, and long-term care that can catch a lot of retirees offg guard.
[15:52] retired couple will need approximately $315,000 saved just to cover health care and medical expenses throughout retirement. And that's after accounting for Medicare. So before you turn 65, familiarize yourself with the different
[16:06] parts of Medicare. And if you retire before 65, you'll need a bridge in. I just want to emphasize that you should have a plan for your healthcare concludes all the money mistakes by every decade. Which one are you the most
[16:20] guilty of? Let me know in the comments. If you want to calculate exactly how make sure to watch this video right here on the 4% rule. It walks you through retirement number. I'll see you guys in that video or a future one on the
[16:35] channel. Thank you for being here again. Peace.