10 Money Mistakes You Might Be Making

Making mistakes with your money is never a good thing, but you can also use it as a learning experience so that you don’t repeat the experiences. If you’re low on money, in debt, or both, it’s time to examine the reasons why. Here are 10 common mistakes that people make and what you can do to solve it.

Getting into debt early in life

You’re turned 18. Congratulations, you are now old enough to be approved for a credit card! This is where the problems start. You are offered free gifts for signing up. Or there’s a zero percent APR if you pay the minimum balance. You can request a student loan that also pays things above and beyond your tuition. When young people get hooked on credit without understanding the true value of money, they will buy things left and right. It’s no surprise that Americans aged 18 to 29 have collectively racked up more than $1 trillion in debt! The lesson here: learn good spending habits before you start using credit cards.

Using too many credit cards

Related to the problem above, having multiple credit cards makes it more difficult to spend within your means since once you begin to max out one card, you can simply start using another one. Imagine having three cards with credit limits of $4,000, $7,000, and $10,000. That’s a total credit line of $21,000, and if you aren’t a disciplined spender, you could see your debt spiral out of control. It’s best to stick to one or two credit cards maximum, and make sure to pay off the entire balance every month. If you can’t, it means you’re spending more than you can afford.

Eating out all the time

We understand that it’s far easier and more convenient to dine out or order a pizza than it is to take the time to go grocery shopping and prepare meals yourself, but studies have found that if you prepare at home, you will end up saving around $7 per meal. Over time that really adds up! Besides, nobody makes hot dog fried rice the way you like it better than you can, right?

Not saving for retirement

When you’re young, you have your whole life ahead of you. Retirement feels like millions of years away when you’re 20, but let’s face it: someday you’re going to wake up (hopefully) and when you look in the mirror, a 65-year-old man or woman will be staring right back at you. Don’t put it off in your 20s or 30s. Don’t enter your 40s with only a few thousand dollars saved up. Meet with a financial planner as soon as you’ve started your career. The old and grey-haired version of you will be so grateful!

Not keeping track of your spending habits

When you have no idea how you’re spending your money, you’ll be surprised to see how quickly it disappears. Ordering a $6 venti orange mocha frappuccino might not seem like a big deal, but if you’re doing it every day, that comes out to almost $200 a month. Ouch! There are a whole lot of expenses you might have severely underestimated. For instance, a survey found that folks who estimated they were paying around $79 total for all the streaming services they were subscribed to were actually paying around $240!

Not keeping a budget

We appreciate that keeping a budget isn’t something everybody is excited about doing. You might perceive it as restricting you from being able to enjoy life and buy what you want. But the truth is, the key to financial freedom is knowing how much money you’re planning to spend each month. You don’t even need to create any complicated spreadsheets either. There are plenty of apps including PocketGuard, Mint and YNAB that make budgeting easy!

Not keeping a rainy day fund

It’s important to be prepared for the unexpected, but unfortunately a huge percentage of Americans (40% to be precise) have no more than $400 to spend if they were faced with expenses related to a car accident, a medical emergency, and other unanticipated situations that require spending money. Make it a goal to have at least $1,000 available in case you need it. To achieve this, every time you receive your paycheck you should aim to put $50/$100 away immediately into a savings account.

Buying things you don’t need

When you see signs announcing items on sale, it’s tempting to want to buy them. You’re getting a good deal, after all. But unless you have already planned to go shopping or have a legitimate need for something, avoid getting into the habit of buying things just because the price has been marked down.

Living large

No matter which income bracket you belong to, there’s a good chance that you’re spending much, much more than you can afford. Why do athletes go broke when they make millions? Owning a mansion and two dozen luxury cars doesn’t help. You might not relate to this example, but surely you or a friend of yours has spent beyond their means, opting to purchase a bunch of PS5 games they shouldn’t have. Live within your means, pay your bills, stash some of the money away for retirement and unplanned expenses, and if you’ve got something left over, by all means have fun with it.

Going into denial

It’s your money, you should be able to spend it however you want. Gee, who plans for retirement when you’ve still got 45 years to go? Budgeting is too complicated. You’ve nearly maxed out on your credit cards, but meh, you’ll just open a new account. If any (or all) of these thoughts pop into your head, it means you’ve convinced yourself that there’s no way you’ll fall off the financial cliff. That’s definitely not the right approach. Keep this sage advice in mind: nobody said money management would be easy, but much like pimpin’ it’s necessary.