Some common money mistakes you probably know you’ve made include going overdrawn in your checking account, missing a mortgage payment, or not paying a bill on time.
These are easy mistakes to spot, that many people do from time to time.
Other common mistakes include overspending on the holidays, filing your taxes late, or not saving regularly.
If these common mistakes sound familiar to you, then what else are you missing?
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Getting your finances in order should be everyone’s top priority. Now you’ve got a reminder about the common mistakes, let’s look deeper into the 13 outdated money mistakes you need to avoid.
13 Money Mistakes To Avoid
These 13 outdated money mistakes are all avoidable and in this guide, you will learn how.
Rushing Into Home Ownership
Most people aspire to own their own homes. If you plan properly, then there is no reason why you can’t buy your own home one day.
However, a mistake many people make is rushing into buying their first home. Societal expectations often put pressure on young adults to hit certain milestones by a certain age, including buying their first property.
Rushing into buying your first home can be a mistake if you are not financially stable. Homeownership involves many extra costs such as insurance, taxes, and maintenance. If you are just beginning your career, then you may not earn enough yet to comfortably cover all these costs and everything else you need to pay for.
Sometimes people rush into buying a home that is far more expensive than they can afford. The more you are spending on housing the less you can spend on paying down debts, other bills, and having cash left over to live on.
These mistakes can be avoided by making sure to avoid buying a property before you are ready. Make sure you can afford to buy the home and all the associated costs. It’s also recommended you make sure not to spend more of your budget on housing than you can afford – in other words, don’t buy the most expensive property!
Did you know that the average cost of a wedding in the US is more than $33,000? That’s an eye-watering amount of money for many people. Getting married can be one of the most expensive things you will ever do other than buying a home or paying for your kid’s college.Although big weddings can be amazing, they can also leave you with a large debt that could take decades to repay.
Starting married life with significant debt isn’t the best idea. Instead, try to have a wedding that is within your means. Getting together with friends and family to celebrate this happy day doesn’t have to involve spending tens of thousands of dollars.
A simple ceremony followed by a casual party can be a fabulous way to do a wedding (and less stress too!).
In the US, the average hospital stay costs a whopping $11,700 per night! Could you afford that without health insurance? The answer for most people is probably not.
Medical debt is believed to be the most common type of debt that Americans owe.
Not having health insurance may save you money now, but in the long run, can turn into a lifetime of debt. Accidents, illness, and other health events can strike at any moment.
Make sure to always have the best health insurance plan your budget permits. Don’t forget, if you are under 26 you can stay on your parent’s health insurance plan – make sure to stay on this until you can afford your own plan.
Failing To Plan For Retirement
People in their 20’s and 30’s often put off planning for retirement as they fall into the trap of thinking they have plenty of time.
The truth is that it’s never too early to start planning for retirement. Ideally, as soon as someone starts earning a wage, they should be contributing to a retirement fund. The earlier retirement savings are started, the more money there will be in the pot when you get to retirement age.
Another good reason to start saving early is that it means you could retire early should you wish to.
One of the best ways to build wealth for retirement is to save as much as you can. Contributing to a 401(k) or 403(b) plan can save you money on taxes as contributions up to a specified amount are tax-deductible.
Another benefit of employer-sponsored retirement plans is that they match your contribution up to a specified amount. In some cases, this can be worth thousands of dollars a year!
Don’t put off retirement planning – start now and you can enjoy the retirement that you want. Retiring early, traveling, and helping children buy their first home are all financial goals retirees can achieve by saving early.
Is Grad School Necessary?
The next outdated money mistake will heavily depend on your chosen career. Some careers are guaranteed higher earnings and opportunities by obtaining an advanced degree.
However, going to grad school isn’t always worth it. You could leave with tens of thousands of dollars of extra student debt, but no guarantee of higher earnings or job security.
The answer here is that you don’t have to go to grad school. Thoroughly research your chosen career path to see how an advanced degree would benefit you. If there is no benefit, then don’t take on the additional debt, and simply start your career instead!
You may find the extra time gaining work experience is far more beneficial to your resume than more time spent studying.
Not Building Credit
Buying your first home or signing up for your first credit card is easy right? Not always! Lenders have a range of criteria you must meet before they approve any credit.
One aspect most lenders want to see is your credit history. If you haven’t got any at all, then this can have an adverse effect on your application.
It’s important to build a credit history as soon as you can. Please note – no one is advising to get into debt. Instead, spend a small amount on a credit card and pay it off in full every month. Doing this means you don’t pay interest, but can show the ability to manage a financial product.
Giving Up On A Career Path
A common situation that arises after graduation is that people can’t find a job straight away or that there is little opportunity for promotion. As bills need to be paid many people stay in a job with little prospect of future advancement or higher earnings.
One result of this is that over their lifetime they will earn less than someone that builds a career in the professional workforce.
Getting a job in your chosen field may be difficult when starting out. There could be lots of competition, fewer roles available, or you may have to move to a new city or state. However, persevering with launching your career will mean your lifetime earnings will enjoy a significant boost.
Make sure not to give up on your career as one day the right opportunity might come your way.
Paying Off Student Debt Too Fast
Generally, paying off debts as fast as possible is always a good idea. Being debt-free is a fantastic feeling and something everyone should strive for. However, paying off student debt too fast can be a money mistake.
The reason for this is that by putting all your money towards paying off student debt, you aren’t using it for anything else. Building an emergency fund or starting to save for retirement is just as important as paying off debts.
Think about it this way – if you have an emergency like a job loss or a medical bill and can’t pay it as you have no savings, then you could be financially crippled. By striking a balance between paying off student debt and saving, you are ensuring you are prepared for all eventualities.
Relying On The Bank Of Mom and Dad
Many parents are generous enough to help their children pay for college, buy their first home, or pay for a dream wedding. Helping with these costs is fantastic if your parents are able to do so.
One trap some people fall into is to become reliant on financial assistance from their parents.
It’s great when mom and dad can help, but it can mean you aren’t building up your own financial resilience. Becoming a financially independent adult is important. Parents can suffer financial losses at any time which means their help could run out one day.
By learning to stand on your own feet, then you won’t suffer should your parents suffer financial hardship. In fact, you could return the favor and help them should they ever be in need!
Poor Planning And Budgeting
If you don’t have a plan, haven’t got a budget, and have unrealistic financial goals, then you are making a big money mistake.
One of the most important things you can ever do is sit down and properly work out your finances. Set realistic goals and create a detailed budget.
More than 60% of Americans are living paycheck to paycheck. If you are one of them, then it’s vital you take charge of your finances and start making what money you do have work better for you.
To start with, figure out what your goals are in life. Homeownership, paying off debts, and building an emergency savings fund is common goals to start with.
Once you know what you want to achieve and when by, the next step is to create a detailed budget. Make sure to account for every single cent that you spend each month.
Armed with a budget you can see if you have any problem spending. Any money you can save on spending can be used for other items on the budget such as adding to savings or investments or paying off debts.
When looking at your budget check all your bills to see if money can be saved. Insurance, utilities, and housing costs can often be negotiated.
Subscriptions are another area that people often forget about. You may think you are simply spending a few dollars per subscription. However, you could be spending over $100 a month if you are not careful. Gym membership, magazine subscriptions, and streaming services can soon add up if you have multiple subscriptions. Make sure to cancel everything that you don’t need.
Food is another area that people easily overspend. Check how much you eat out or buy coffee on the go. You will be surprised how much this can add up!
Try to reduce your food bill by eating out less, making your own lunch every day, and switching to cheaper brands when grocery shopping.
By having a budget and regularly checking it, you can avoid one of the most common money mistakes. You will also be more likely to achieve your financial goals in life.
Not Having A Side Hustle
Earning extra income in your free time can be an excellent way of making sure you reach your long-term financial goals.
Having a side hustle can also mean in the event you suffer a job loss that you still have some income to keep you going.
Ultimately, any extra money you can earn will benefit you. There are hundreds of things you could do that pay varying amounts. Blogging, answering surveys, selling photos online, how to flip money, and pet-sitting are just a few of the things you could do.
Search online for ideas that suit your lifestyle to start a successful side hustle. Some of the best side hustles pay cash, others pay in gift cards, whereas others let you earn free PayPal money. Either way, it’s more money for you!
Failing To Build An Emergency Fund
Unexpected bills can appear at any time. A medical emergency, car breakdown, or job loss can occur at any moment.
When these events happen, are you prepared to absorb the financial shock?
Many people would struggle to pay an unexpected bill and end up sinking into debt.
By building an emergency fund you are ready to pay these bills when they occur. If possible, try to build a fund that will cover at least 3 months of expenses, more if you can.
Even if you can only save a few dollars a month right now, do it! Those few dollars add up over time and when you are financially better off, then you can start saving larger amounts. Some savings will always be better than none!
Running Up Credit Card Debt
Although it’s important to build up a credit history, getting into credit card debt is a big money mistake.
Credit cards provide an easy way to pay for things. Younger people often fall into the trap of relying on them to get to the next paycheck.
When used like this it means you will always owe the credit card provider as interest and fees are designed to increase the debt. It’s especially bad if you can only afford to pay back the minimum amount each month.
The best way to use a credit card is to only spend what you can afford to repay in full each month. That way you aren’t going to end up in debt forever. If you can build an emergency fund as well, that means you can use that to pay any unexpected bills instead of a credit card.
Tips To Avoid The Worst Offending Money Mistakes
Mastering your finances is one of the most important things you will ever do. Now you know the mistakes to avoid, here are some tips to help you do it!
Make a budget! Budgets are crucial in becoming financially successful. Knowing exactly where every cent is going means you can see what spending to reduce. Any savings can then be used elsewhere for building savings or paying off debts.
Seeing where the money goes can often be shocking at first. It’s very easy to spend hundreds of dollars a month on food, drinks, and entertainment.
By tracking all spending and actively managing your budget, then you can vastly improve your finances and reach your goals.
The next tip is to learn to use a credit card responsibly. When correctly used credit cards can be fantastic as they are a secure way to pay and help you build a credit history.
Make sure to pay them off every month and don’t overspend!
Get out of the habit of living paycheck to paycheck. Doing this is easier said than done. However, if you create a budget, stick to it, and build an emergency fund, then you will eventually reap the rewards.
The danger of living paycheck to paycheck is that one unexpected bill could ruin you financially.
Learn to budget now, start a side hustle, and build some savings. Doing this now means when unexpected bills arrive you can handle them.
The final tip is to start saving for retirement now. Starting to save earlier means you will have a better chance of enjoying your retirement. Maybe you want to retire early, travel the world, or help your children buy a home. All these things and more are possible if you start saving for retirement now.
The outdated money mistakes listed here could ruin anyone financially. Learning now how to avoid these mistakes and putting your budget into action means you can start feeling more secure about your future.
Whatever your financial situation is right now, it can always be better. Take the time to organize your finances, but make sure to leave some room in the budget for fun!
Although paying bills, debts, and building savings are important if you don’t enjoy yourself sometimes, then your mental health could suffer. Just remember to stay within your budget!
Money Mistake FAQs
What are the biggest financial mistakes people make?
Reducing expenses is good to focus on, but often this means people don’t think about increasing their income. Going for a promotion, working overtime, or starting a side hustle are all possible ways of increasing your income. Always remember – more money coming in is just as good as less going out!
Another big mistake people make is borrowing too much. Ideally, you would never borrow money. However, sometimes it’s unavoidable. When you must borrow make sure to only borrow what you need and have a plan to pay it off in a timely manner.
Overspending is another mistake that is easy to do. By budgeting, you should avoid this, but always be mindful of your lifestyle. Keep it within your means and don’t try to keep up with others. There will always be someone with more than you!
Try not to worry too much about making mistakes. Everybody makes some financial missteps. If you are learning from them, then you will prosper in the future.
How can we avoid financial pitfalls?
Managing your finances may seem daunting. The good news is that with experience it does get easier and dare I say, fun! When you reach your goals, you will have a feeling of satisfaction that is hard to replicate.
By following a few simple guidelines, you can avoid financial pitfalls.
Always start small. If you are new to investing, then don’t immediately deposit your life savings! Start small, learn how investing works, and grow your investment over time. All investing carry’s risk, by keeping your risk small to start with you can learn from those early mistakes without losing everything!
Learning as much as you can is another great way to avoid financial pitfalls. Books, blogs, YouTube videos, and more are all available to teach you about any financial topic you can think of. The more you know, the more confident you will be when making decisions.
If in doubt, ask! When unsure about any financial topic, find someone you can ask. It could be a friend or relative, a bank employee, or a financial advisor. There is nothing wrong with asking questions to understand a topic better.
How do you recover from a financial mistake?
Most people will make financial mistakes, especially in their younger years. Provided you learn from it, then these mistakes don’t have to be traumatic (although it may feel like it at the time!).
Budgeting, building an emergency fund, and tracking spending are all excellent ways to recover from financial mistakes.
How do I move on if I have lost money?
Losing any amount of money can be devasting. Stories of people losing their life savings due to poor investment choices are a stark warning of what can happen in the worst cases.
Thankfully, most financial losses aren’t as severe as losing everything. However, when you do suffer a loss, it can damage your confidence and impact your mental health.
The bigger the loss, the bigger the impact it can have. Losing the money can be compounded by the impact on your financial goals. Retirement savings, homeownership, and paying off debts are some of the plans that could be ruined when you suffer a financial loss.
To deal with this you need to accept what has happened and understand it. Make sure you learn from the event to ensure it doesn’t happen again.
Depending on the severity of the loss you may need to speak to someone about it. A trusted friend or family member, therapist, or spiritual leader can all be helpful in times of crisis.
Don’t be afraid to reach out to someone in your support system for help. Talking the situation through will help you manage your mental health and ultimately come back stronger.
What money mistakes should you avoid in your 20s?
Your 20s are the decade when adult life really kicks in. You’ve finished your education, left home, and started your career. If you can balance enjoying your 20s with being financially prudent, then the rest of your life will become much easier! Here are some things you should avoid in your 20s.
Don’t put off saving for retirement. In your 20s retirement feels a long time away. Many put off saving but if you start now, then your retirement can be awesome.
It’s important to start saving whatever you can now. Thanks to employer contributions and interest your fund could be worth a lot of money when you retire. Certainly, a lot more than those that haven’t saved anything!
Make sure to live within your means. When you get your first real job it’s tempting to spend, spend, spend! By overspending, you will quickly end up in debt, have no savings, and potentially turn 30 with no plan for the future.
Instead, start your 20s as you mean to go on. Budget, save and invest so that you can be financially secure. Live within your means and you won’t have to worry. That’s not to say you can’t enjoy yourself – just don’t overdo it!
Not building credit may seem smart. Debt is a bad thing to have, right? This is only partly true. Problematic debts with high interest that you struggle to pay are bad. But, not having any credit means you may struggle to get credit when you want it.
Lenders often want to see some credit history before they approve a home loan, credit card, or car loan. To do this try to use one credit card for a small amount every month and pay it off in full. Just make sure not to overspend or pay late!
Many people don’t have an emergency fund. The downside is that in the event of an emergency you can be financially ruined. Save what you can in an emergency fund, so this doesn’t happen to you. Even small amounts each month add up over time.
When you are in your 20s you are indestructible! Or you feel that way at least. This means many 20-year-olds fail to get adequately insured, or in some cases have no insurance at all.
Accidents, illness, or death can happen at any moment. Even in your 20s! Make sure to get as much insurance as you can afford. Don’t forget that employers often have policies you can join, or you can stay on a parent’s health plan until the age of 26.
If you have children, then it’s vital you have the proper insurance to make sure they are cared for in the event the worst happens. Don’t put this off, deal with it today.
Not having a budget with realistic financial goals is the biggest mistake to avoid in your 20s. You don’t have to plan your entire life out, but having some idea of what you want to do will mean you put your money to better use.
Goals will change as you get older. Paying off student debt, buying a new car, and saving for a deposit for a first home are common goals for people in their 20s. As you age, you may add regular vacations, early retirement, or paying for your own child’s college!
Having goals and a detailed budget will help you achieve whatever you want to.
The best thing is that it’s not set in stone. You can change those goals any time you like to anything you want.
Just remember to regularly review your budget, that way whatever you want to do will be attainable!
This article originally appeared on TheFinanciallyIndependentMillennial.com and was syndicated by MediaFeed.org.
Featured Image Credit: DGLimages.