Do you want to improve your money management skills? Yes! Then you are in the right place. Avoiding these 13 outdated money mistakes is an excellent first step to becoming an expert at managing money.
Everyone can master the art of managing money. Giving yourself the gift of learning how to make good financial decisions is something that will reward you for the rest of your life.
Learning how to manage your finances is a constant process. Most people will make some mistakes, although with experience there should be a lot fewer mistakes made!
By learning the money pitfalls to avoid, your financial decision-making skills should significantly improve. Now, let me share some common money mistakes everyone should avoid.
It’s Common To Make Mistakes With Your Money
Money problems are a leading cause of stress, there are lots of potential mistakes to be made where money is concerned.
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?
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 Now you’ve got a reminder about the common mistakes, let’s look deeper into the 13 outdated money mistakes you need to avoid.
13 Outdated Money Mistakes
These 13 outdated money mistakes are all avoidable and in this guide, you will learn how.
1. 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!
2, Lavish Weddings
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!).
3. Health Insurance
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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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!
10. 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 i life.
11. 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!
12. 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!
13. 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.
Conclusion
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.
