No one is perfect. We’ve all made money mistakes that we wish we could travel back in tie and undo. But since we can’t just turn back time, the next best thing is to learn from our mistakes and avoid making them again.
Here are some of the most common money mistakes that will cost you time, money, and stress.
1. Using Your Credit Cards For Everyday Expenses
You’re trying to watch your spending, but it’s not quite payday and you’re finding yourself a little short of funds. But all your friends are going out for drinks after work and you don’t want to be the only loser sitting at home by yourself. So you whip out your credit card and to hell with the consequences.
This is how many people get themselves into trouble. Credit cards are so convenient that overspending is easy. Plus, people tend to spend more money when they are paying with credit.
Using a credit card to cover your everyday expenses when money is tight is an easy way to dig yourself deeply into debt in a very short period of time.
2. Buying the Cheapest Option Instead of the Best Value
Some people think that being frugal means spending as little money as possible.
I disagree. To me, frugality isn’t the same as being cheap. It means you make smart money decisions and spend on the things that really matter while cutting back on things you really don’t care about.
Always buying the least expensive choice doesn’t make you frugal, it makes you foolish. Sometimes it is worth spending a little extra if the quality is better and you can get more use out of an item.
For example, I don’t have an expensive wardrobe but I’d rather spend a few dollars more to get a shirt that will last me several years than go cheap and end up having to replace it after just one season.
Similarly, I love grilling and smoking meat in our backyard and I’m in the market for a smoker. I’m not going to spend thousands of dollars on a new smoker but I’m not going to get a piece of garbage that will rust out after a year or two either. I’m looking for the best smoker possible at a price I can afford.
3. Going Without Insurance
Insurance is one of those weird things that we pay for and hope to never need, and it could be tempting to skip insurance all together to save a few bucks.
You could say, “Hey, I’m young and healthy. I’ll get life insurance when I’m older. And I’m an excellent driver, so I’ll skip car insurance too.”
Big mistake. Insurance is there to protect you and going without it might save you some money upfront, but it could leave you financially devastated in the long run.
4. Falling Behind on Your Payments
Paying your bills on time is extremely important. Once you fall behind you’ll end up getting hit with late fees and creditors can increase your interest rate which means you’ll be stuck paying even more. This can put you in a downward spiral that is difficult to get out of.
5. Not Setting Any Financial Goals
Which is easier: saving $200 a month to increase your savings or saving $200 a month to pay for a family vacation to Disney World?
Research shows that having specific goals helps you stay focused and motivated. When you’re able to visualize a specific goal you’ll find it much easier to make short term sacrifices and to stay on target.
6. Not Following a Budget
If you aren’t using a budget to track your spending then you likely have no idea where your money is going. Even if you’re earning really good money, you can still be struggling to make ends meet. Your finances are out of control and that is just a recipe for disaster.
Following a budget helps ensure you’re living within your means and moving closer to your financial goals.
7. Not Having an Emergency Fund
If there’s one thing I’ve learned in my life it’s that Sh*t Happens!
Unexpected expenses pop up all the time and usually they happen at the worst possible time. Or multiple expenses pop up one after another and catch you by surprise.
If you don’t have an emergency fund set aside for life’s unexpected bills, you could end up using credit cards to get by. And we’ve already established that is a very bad idea.
If you don’t have an emergency fund right now, you should start one before you need it. Open a separate high yield savings account and start putting in a little money every month. Start with just $10 to $25 per paycheck and you’ll be surprised how fast it grows.
8. Depending on Only One Source of Income
You’ve heard the old saying that warns against putting all your eggs in one basket, and that goes for your finances too.
Most people rely only on their day job for income, but what happens if something happens to your job? Your company could go out of business or restructure and eliminate your job. What then?
This is why building multiple streams of income is important. You could get a part-time job, start driving for Uber or Lyft, take online surveys, or start your own blog.
9. You Replace Things That Aren’t Broken
This year our family spent a lot of time at the beach. We all love laying in the sun and riding the waves. But on one trip our Tommy Bahama umbrella broke. It’s a great umbrella and we’ve had it for years, but this year the auger that helps it dig in and stay put in the sand broke.
My first thought was, “It’s time for a new umbrella.”
But when we got home I took a closer look and realized it was something I could fix myself. After rummaging around the garage for a couple of small screws and washers, I managed to reattach the auger to the pole in less than 5 minutes.
We tried it out on our next beach trip and it was as good as new. Total cost: about 5 minutes and maybe ten cents for the screws and washers.