We all make money mistakes from time to time, but some slip-ups can cost more than others. If you’re feeling like your finances are a bit out of control or you’re not quite hitting your financial goals, you’re not alone. The good news? Most common money mistakes have straightforward fixes.
From budgeting blunders to investment oversights, here are our top 12 worst money mistakes — and how you can turn them around to pave your way to financial success.
1. Living beyond your means
The Mistake: Spending more than you earn leads to debt and financial stress. According to CNBC, 65% of Americans live paycheck to paycheck, highlighting the importance of living within your means.
The Fix: Create a budget to track your income and expenses. Stick to it and avoid unnecessary spending. (We came up with some ways to help you make a simple budget you’ll adhere to.)
2. Not having an emergency fund
The Mistake: Without an emergency fund, unexpected expenses can lead to debt.
The Fix: Aim to save at least three to six months’ worth of living expenses. Start small and gradually increase your savings.
MoneyLion has a way you can find and compare high-yield savings accounts
3. Carrying high-interest debt
The Mistake: High-interest debt, like credit card balances, can drain your finances. The average debt in America is $104,215 across mortgages, auto loans, student loans, and credit cards, according to Business Insider. And that doesn’t count the staggering interest that debt will accrue.
The Fix: Focus on paying off high-interest debts first. Consider transferring balances to a lower-interest card or consolidating debts for better rates.
4. Not understanding your credit score
The Mistake: Ignoring your credit score and its impact. A low credit score can result in higher interest rates on loans, making big purchases like a home or car more expensive. It can also affect your ability to rent an apartment or even get certain jobs.
The Fix: Regularly monitor your credit score. Understand the factors affecting it, like payment history, credit utilization, and the length of your credit history. You can help improve your score by paying bills on time, reducing outstanding debt, and avoiding new credit inquiries.
5. Ignoring retirement savings
The Mistake: Not saving for retirement can lead to financial difficulties in your later years. According to a survey by the National Institute on Retirement Security, 66% of working millennials have nothing saved for retirement.
The Fix: Contribute to retirement accounts regularly. Take advantage of employer matches if available. Use online calculators to estimate how much you need to save.
6. Paying unnecessary fees
The Mistake: Bank fees, late payment fees, and overdraft fees can add up quickly.
The Fix: Opt for fee-free banking options. Set up automatic payments to avoid late fees. Monitor your accounts regularly to prevent overdrafts.
7. Making impulse purchases
The Mistake: Impulse buying might seem exhilarating at the time, but it can wreck your budget and lead to regret.
The Fix: Sleep on it: Implement a 24-hour rule before making non-essential purchases. Plan your shopping and stick to your list. Unsubscribe from promotional emails that encourage impulse buying.
8. Not having insurance
The Mistake: Lack of adequate insurance can result in significant financial loss. According to the Insurance Information Institute, 13% of drivers in the U.S. are uninsured.
The Fix: Ensure you have health, home, life, and auto insurance as needed. Regularly review your policies to make sure they cover your current needs.
9. Neglecting to plan for big expenses
The Mistake: Failing to plan for large expenses like vacations or home repairs can lead to debt.
The Fix: Set up separate savings for big expenses. Plan ahead and save gradually to avoid borrowing money or using credit.
10. Not keeping track of subscriptions
The Mistake: Forgotten or unused subscriptions can drain your finances without you realizing. According to a survey by West Monroe, the average consumer spends $273 per month on subscriptions, many of which go unused.
The Fix: Regularly review and cancel unused subscriptions. Use apps that help track and manage subscriptions to stay organized.
11. Overlooking tax benefits
The Mistake: Missing out on tax deductions and credits that are available to you can leave significant money on the table.
The Fix: Keep detailed records of expenses and donations. Use tax software or consult a professional to maximize your tax benefits. And if you’re not sure where to begin: Consider investing or saving money in tax-advantaged retirement accounts, the benefits of which may seriously add up not just at tax time, but also over timein the long run.
12. Failing to educate yourself about money
The Mistake: Lack of financial knowledge can lead to poor decisions. Learning about just the basics on investing and saving can go a long way.
The Fix: Take time to learn about personal finance. Read books, attend workshops, and of course, download our app for tips and insights. Knowledge is power when it comes to managing your money.
Ready to Roar?
Avoiding these common money mistakes can significantly help improve your financial health. Small changes could lead to big savings over time, helping you achieve your financial goals.
At MoneyLion, we’re committed to helping you make the most of your money. For more financial tips and tools, get the MoneyLion app today.
