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Sometimes, it’s the littlest of things that can make the biggest difference. This is especially true when it comes to finances. Things like living beyond your means or on borrowed money can cost you.
As someone who has made my fair share of money mistakes, I know how stressful it can be. So, what are some common mistakes, and how can they be avoided?
To curate this list, I chose these financial mistakes for their simpleness and commonness. You’d be surprised just how many people don’t have basic things like a budget or emergency savings.
Here are 15 common financial mistakes you can avoid today.
1. Ignoring Credit Card Debt
Credit cards are tricky. While the cards belong to you, the money doesn’t. A common financial mistake people make is racking up unnecessary credit card debt and ignoring them.
If you ignore your credit card debt, interest will accrue quickly. What once was a $30 purchase can turn into a $50 debt. Out of sight, out of mind rarely works.
2. Spending Frivolously
Before you buy something, ask yourself a few questions about the frequency of use and benefits you anticipate. I’m guilty of spending frivolously on items I don’t use today. So many shoes and nicknacks are sitting in my closet, unused.
This financial mistake is small but can cost you so much money in the long run.
3. Shopping Online
Okay, this might sound like a stretch, but it’s true. Online shopping habits can be a financial mistake. Having digital access to your card is convenient—almost too convenient.
Instead of buying items frequently online, leave the items in your cart for at least 24 hours. It’s even better if you can leave it alone for a week. In a week, will you even remember what you wanted to buy?
4. Not Canceling Free Subscriptions
I’ve accidentally kept subscriptions past their free trial an embarrassing number of times. It’s so frustrating to see a renewal for a product you don’t even like or use. This common financial mistake can cost you.
I’ve started subscribing to free trials and then immediately canceling them. Usually, you still have access to the trial and don’t have to remember to cancel at the end of the trial.
5. Going Into Debt for Wants
Sometimes, debt is necessary. Very few of us have enough money to cover an emergency hospital bill or an expensive car repair. When this happens, using a credit card or lender makes sense.
But using credit cards to buy sports or concert tickets, clothes, makeup, new video games, and other nonessentials doesn’t make sense. A want is not a need.
6. Avoiding Retirement
Your retirement age isn’t as far away as you’d think. Yet, many people don’t think about or save for their retirement. If you don’t, you can be left in a tough financial spot as you age.
A recent study found that nearly 1 in 3 respondents don’t have retirement savings.
7. Not Setting a Budget
In the world of finances, budgets are everything. So many people don’t create proper budgets, which can wreck their finances. If you don’t allocate your spending, how do you know what you really have?
8. Opening Too Many Credit Cards
Credit cards aren’t entirely bad. They can help you increase your credit score, and some lenders offer great benefits. However, owning too many can hurt.
First, they are tempting to use. Secondly, credit card inquiries can impact your credit score. Having too many inquiries can lower it.
9. No Emergency Savings
A great way to set yourself up for success is to establish a 6-month emergency fund. Not doing so is a common, painful financial mistake. A well-allocated emergency fund has the potential to save you from an unexpected bill.
You never know when you’ll lose your job, either. Having emergency savings can help.
10. Only Paying the Minimum on Credit Card Payments
I know this sounds contradictory, as an earlier solution was paying at least the monthly minimum, but hear me out. Paying something is better than nothing. But paying just the monthly minimum can cause you to pay more than you’ve spent due to exorbitant interest rates.
If possible, pay more than the minimum. Ideally, plan to pay the total balance by the statement date each month.
11. Misusing Your Tax Refund
If you’ve paid too much taxes, you’ll receive a refund from the government. Although it’s tempting to use this extra money on wants and fun, this is a misuse. Instead, use it to pay debts or put it in your savings.
12. Not Having Health Insurance
Health insurance is expensive, but not all employees offer this benefit. But that’s no excuse to skip coverage. Without health insurance, the cost of a doctor’s visit can rise exponentially. Not having health insurance is a financial mistake.
13. Not Having Renters/Homeowners Insurance
Health insurance isn’t the only important insurance in your life. Homeowners and renters insurance can save you so much money. Even if you probably will never use it, having insurance can ease your mind.
14. Refusing to Check Bank Balances
Sticking to a budget isn’t enough. You also need to check your progress by reviewing your spending and bank balances. If you don’t, this mistake can hurt you in the end.
Unexpected recurring payments can put a hamper in your budget. And what happens when you accidentally overspend?
15. Living Beyond Your Means
This last common mistake combines all the previous ones. Living beyond one’s means is stressful, and it’s all too common. Many of us try to keep up with our friends, family, and the latest trends. And to what end?
This mistake isn’t necessary. Once you create a budget, you can decipher what living within your means looks like. It’s different for everybody.
