You probably didn’t spend much time daydreaming about retirement in your early years. But as you creep into your 40s and 50s, retirement starts to get your attention. Some of your greatest years are just around the corner—if you plan accordingly. And now is one of the most important times to steward your financial health.
If you stay on track with your goals, you will sail right into your golden years. But there are a few basic money mistakes that can derail your progress. Here are five of the big ones.
1. Holding onto consumer debt
Don’t carry consumer debt around like a badge. Your income is your biggest wealth-building tool, and you don’t need it tied up in student loans, car notes and credit card bills. The more money you have to pay creditors, the less money you can pay yourself. Wouldn’t you rather earn interest in your 401(k) than pay interest to Sallie Mae?
Related: Is Your Debt Stressing You Out?
2. Upgrading your lifestyle before you can afford it
Most people reach their peak earning potential in their 40s and 50s. And while that’s great news, some people celebrate an increase in salary a little too much. If you’ve been living on a budget and running hard at your financial goals, great! But if comparison and entitlement sneak in and tempt you to spend money you don’t have—or money better spent elsewhere—you could be in trouble. Keep opportunity cost in mind when you’re making these lifestyle choices.
3. Relying on the government
It would be great if you could count on the government to pay for your retirement. But don’t hold your breath. Social Security was set up as a safety net for retired employees over the age of 65 back in 1935. But here’s the thing: The average life expectancy back then was only about 60 years old. With modern medicine and technology, people are living longer than ever. The system just can’t meet the demand.
You are responsible for your own retirement—not the government. And whatever you get from the government is icing on the cake. But it doesn’t need to be your only source of retirement security.
4. Prioritizing college savings over retirement
There aren’t any guarantees your children are going to college. But it’s almost certain that you’re going to retire. And unless you plan on moving in with your kids when you retire and have no money, this isn’t a good plan—for you or for them.
There’s nothing wrong with wanting to help your kids. Any good parent wants the best for their children. But think about it like this: on an airplane they say to put on your own oxygen mask before taking care of your kids. That isn’t because your children aren’t a priority. But you can’t help your kids if you can’t breathe yourself. Secure your retirement first, and then think through college options for your kids.
Related: Is It Your Job to Pay for College?
5. Putting all your eggs in one basket
Balance is important in just about any area of life. It’s especially smart when it comes to saving for retirement. If you put all of your money into a single investment and it crashes, you could lose all your money—and potentially never regain the ground you lost.
You can avoid unnecessary risk by diversifying your retirement savings across several different types of investments. Just don’t panic when the market ebbs and flows. It’s the nature of the free market to go up and down. After all, the only people who get hurt on a roller coaster are the ones who jump off. Stay in your seat!
If you stick to your goals and avoid these five big money mistakes, you’ll be facing one of the best seasons of your life before you know it. You have the power to make your retirement a dream come true. Just stay focused, keep dreaming, and run hard toward the finish line.