The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.
The 10 Money Mistakes Everyone Makes
No one’s perfect, especially when it comes to managing your finances. Learn about the most common money mistakes and how you can bounce back after a less-than-amazing financial decision. Whether you’ve got mountains of credit card debt or you YOLOd out of keeping a budget, you’re not alone.
Here’s a little secret: Everyone makes money mistakes at some point in their life. Sure, there are plenty of Fortune 500 CEOs and celebrities living the good life now, but many others overspent and lost it all. And don’t forget that the YouTuber who paid off $30K of credit card debt in two years made the mistake of getting buried in the first place. So if you made a few financial fumbles so far, you’re not alone!
We’re counting down ten of the most common money mistakes that nearly every adult makes at some point. Starting with one of the earliest…
#10: Getting Into YA Debt
You’re just minding your business, putting your first-real-job paycheck toward saving up for a more reliable car or your emergency fund when BAM! — You get a credit card offer with a free gift! Or a zero percent intro APR! Or even better, student loans that will pay for EVERYTHING! Americans 18-29 years old owe a whopping $1.05 trillion in debt1, according to data collected by the New York Fed Consumer Credit Panel and Equifax. If you’ve already accumulated a mountain of debt before you leave home, it can be pretty difficult to start saving for your goals. Read our tips for paying off debt fast for ideas on how to dig yourself out.
#9: Dining Out … a Lot!
Testing out that new Pinterest recipe seems pretty enticing … that is, until you spot a $5 off coupon on Grubhub. Whether you’re ordering takeout, having food delivered or dining in at a local restaurant, eating away from home can be pretty pricey. One minute you’re feeling good about ordering off the Dollar Menu and the next, you’re 10 pounds heavier and your monthly budget is busted. Bet that curry chicken salad recipe is looking pretty good now.
#8: Waiting to Save for Retirement
One of the most common money mistakes is putting off retirement planning. Younger people may feel that retirement is SOOOOOO far away that they have plenty of time to save. Once you’re staring down thirty you think stashing 2% of your salary in a 401(k) is enough. Then you’re 40 with maybe a year or two’s salary saved and the reality hits. *cue ominous music* Of course, it’s best to start saving for retirement early. But even if you’ve neglected your Golden Years fund in favor of trips to Cabo, you may be able to make up for it later.
#7: Avoiding a Budget
We get it, keeping a spreadsheet that shows how quickly your money disappears isn’t fun. Luckily, there’s an app for that! If you’ve been tempted to skip budgeting since you “don’t need one” or you “already know where your money goes (i.e. mostly to bills),” you’re missing the point. Budgeting can help you reach your financial goals, whether that means buying a new couch or an entire home to put it in. Consider tracking your spending with a personal budgeting app like PocketGuard, Mint or YNAB (You Need a Budget). They’re typically cheap or free, easy to use, and can show you the hidden places you might be overspending. Tip: If you’re a Desert Financial member, our highly rated Desert Financial Mobile app has a built-in budgeting feature. Download it now from the App Store or Google Play.
#6: Skimping on Your Emergency Fund
Most experts recommend having at least $1,000 in the bank to cover unexpected expenses like car repairs and medical bills. But a grand won’t cover major expenses, which could mean going into debt anytime you experience big changes. Aim to save around six months of living expenses for more radical changes like job loss or a cross-country move. Not sure where to start? Check out our tips on how to build an emergency fund.
#5 Overusing Credit Cards
Having 2-3 credit cards open and making on-time payments can be a great way to build your credit. This can include a mix of store cards and major credit cards like Visa and MasterCard. Sounds great — until the bill comes due. If your credit card limits are $2K, $4K and $7K, that’s thirteen thousand dollars of debt you can rack up if you’re not careful. Depending on how long you take to pay off balances, you could end up paying thousands of extra dollars just in interest alone. Would you rather your money go toward interest payments or a new car? You make the call.
#4 Buying Too Many Things
We all could learn to live with a little less. Minimalism has become a hot trend in recent years, as people look to replace disposable things with unforgettable experiences. That doesn’t necessarily mean downsizing to a tiny home or culling your shoe collection to two measly pairs (goodbye, sparkly diva heels and custom Nikes!). It boils down to one simple question: When considering a new purchase, whether it’s a pair of socks or a surround sound system, ask yourself, “Do I really need this?”
#3 Losing Track of Your Spending
Even if you budget down to your last cent and don’t think you’ve spent any extra, you may find yourself unexpectedly in the red. What happened? While it might seem like an unsolved mystery, there is no financial equivalent of the dryer that seemingly eats your missing socks. Nope, no money-stealing black hole exists. Look for untracked expenses such as daily coffee or weekly car washes. One of the biggest overlooked expenses is subscription services such as Hulu, Netflix, Amazon Prime or Bark Box. To give you an idea, a survey found that people who estimated they spent $79 a month on subscriptions actually forked out $237!2
#2: Living Beyond Your Means
If you take home $800 a week, you can spend $799 of it and be golden. Right? Let’s unpack that assumption for a second. First, you won’t be able to save anything. Second, you are literally spending every cent you earn … and are you putting any purchases on credit cards? Probably. Living within your means includes budgeting wisely, paying all of your bills and living expenses, putting aside cash for savings and retirement, and maybe having a little left over for non-essentials. If that sounds impossible, it could be time to rethink your budget, ask for a raise, or consider a side gig.
#1: Avoiding It All
If you’re paralyzed by the fear of managing your money or feeling overwhelmed by budgeting, you may do nothing at all. It’s too easy to just live paycheck-to-paycheck with no savings or retirement plan when everything money-related seems like a chore. But putting even the tiniest plan into action will help you overcome this lack of momentum and keep your finances on track. Start simple by keeping better track of your money, trying out a simple budgeting app and remembering to think about it before making an impulse buy.
The upside of making money mistakes is that you can learn from them. In fact, experiencing a financial loss firsthand is one of the best ways to ensure you won’t make the same miscalculation again. As they say, to err is human. But learning to avoid serious money mistakes before they happen feels divine. If you need a little extra help, check out the videos and other resources in our Financial Support Center.