Costly money mistakes compromise your financial stability and can derail your goals for financial freedom. To safeguard your financial wellness journey, here are 13 money mistakes to avoid at all costs.
Overusing (And Misusing) Credit Cards
Using credit cards for purchases you know you cannot afford is a mistake that can quickly balloon.
Credit cards often come with high interest rates and fees, which can make it challenging (or even impossible) to pay off your balance.
If you’re using credit cards for everyday purchases to get cash back rewards, make sure to pay off the balance fully before interest accrues. Or, consider switching to a debit card or cash only strategy.
This will help you stay on budget and avoid costly interest payments.
Investing Sans Due Diligence
Investing without doing your due diligence is unwise and highly risky.
If you are putting your money into an investment, you should do your homework thoroughly beforehand and understand fully that you are putting your money at risk.
It is essential at any age to educate yourself about your investment choices. If you need guidance, enlisting the help of a financial advisor can be helpful.
Buying Impulsively
Impulse buying is another money mistake to avoid at all costs. It’s easy to turn to shopping as a temporary quick-fix to lift your spirits. But this can quickly add up and cause you financial harm.
To avoid buying impulsively, avoid temptations and practice pausing before making any purchases.
This way, you can remember the financial pain of the last time you bought unnecessarily and impulsively and had to figure a way to foot the bill.
Staying At A Dead-End Job
Staying at a dead-end job can also cost you big time in the long run. If you’re not increasing your earnings to keep up with inflation, then you’ll be persistently treading water instead of swimming (financially).
Either make a plan to score a pay raise at your current job or seek an advancement opportunity externally to increase your earnings.
The last thing you want to do is leave money on the table that you could be earning elsewhere.
Failing To Create An Emergency Fund
Failing to create an emergency fund is one of the biggest money mistakes to avoid at all costs.
Having a savings account dedicated specifically to emergencies is a staple of financial responsibility and essential for financial stability.
This way, you don’t have to sell investments or seek new consumer debt to cover any unexpected expenses that life may throw your way.
Living Beyond Your Means
Overspending is a problem that is often habitual and can lead to long-term financial problems, jeopardizing your overall financial wellness.
The key is conscious spending. Understand precisely your pluses (income) and minuses (expenses).
Take a look at the last few months of your bank statements and flag which expenses could have been avoided or reduced.
Try language like saving rather than not spending, as this can make you feel less restricted. Identify needs versus wants and prioritize accordingly. If something is over budget, assess how necessary it is before taking the hit.
With financial discipline, managing your money and avoiding overspending can quickly become second nature.
Automating Unused Subscriptions
What you want to avoid at all costs is paying unnecessarily for things you especially do not need.
Take the time to review your bank and/or credit card statements to check for any recurring subscriptions that might’ve been flying under the radar.
You could be paying for automated subscriptions without even knowing it, and putting a dent in your money as a result.
Failing To Budget
One of the most critical money mistakes you can make is failing to budget effectively. Without a budget, you won’t have a clear idea of how much money you have available to spend and save.
Again, knowing your pluses and minuses is essential to allocate how much money is assigned to each category of your expenses.
From there, set clear goals for how much you can realistically save and invest each month with the leftovers.
Ignoring Debt
Debts are a fact of life, and they come in many forms: credit card bills, student loans, medical expenses, car payments, and more. While they can be a struggle to keep up with, paying off your debts as soon as possible is imperative.
Failing to address your debt is a very common (yet detrimental) money mistake. Ignoring debt can cause you to pay sky-high interest rates and fees, as well as damage your credit score.
This can lead to a slippery slope of compounding and crushing debt that is difficult to manage.
If you’re struggling to manage your debt, consider reaching out to a credit counselor or financial advisor. They can help you create a plan to pay off your debt over time.
Forgetting to Invest
Not investing is another major money mistake. While people often think investing is too risky, it’s often riskier to not invest.
Time is not something you can buy, so failing to invest is one of the most costly money mistakes to avoid if you care about your financial future.
Long-term investing is essential to building wealth over time and letting your money grow through compound interest.
There are many types of investments to consider, such as stocks, bonds, and mutual funds. Investing can also allow your money to make money through REITs and dividend stocks.
There are many different avenues for investing, but it’s important to figure out your risk tolerance first to determine how much volatility you can stomach.
To get started, consider talking to a financial advisor to identify the best investments for your financial goals according to your risk profile.
Lending Money to Friends
Lending money to a friend can not only be bad for you, but it can also take a toll on your friendship.
If you confront your friend about when they plan to pay you back, that could cause strain on your friendship. And if you choose to not confront them, you could grow to resent them.
If you have a friend that asks you for money, simply say that you either don’t lend money to friends or that you are not in a position to lend them money.
Not Shopping Around
Not shopping around is another mistake that can cost you money. From insurance to mortgages, it’s important to shop around for the best deals.
Take the time to compare prices and do your research to ensure you’re getting the best deal possible.
Not Saving for Retirement
Not saving for retirement is one of the worst money mistakes to avoid at all costs. To ensure you are not working forever, create a retirement plan.
Starting early is key, as putting away even small amounts of money when you’re young can make a massive difference down the road. This will help you build a secure financial future.
Without a retirement savings plan, you could end up relying on social security or working past your desired retirement age. This might mean missing out on years of enjoying what you’ve worked so hard for – time with family and friends, travel, hobbies, etc.
Plus, depending on where you are in life and your income, you may be eligible to take advantage of incentives such as employer matches or tax breaks from setting aside money into a retirement fund or account.
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