Money mistakes are pretty common even among those of us that practice good personal financial management methods. In some cases, the guilt from a money mistake can linger and end up causing even more mistakes. A cycle of bad money decision and mistakes can quickly cause problems in your finances so it is best to recognize the mistakes you’ve made and make a commitment to moving on and doing better in the future.
I made a bulk of these money mistakes before I decided to change my relationship with money and sometimes the guilt from those past decisions haunts me still. By deciding to be pro-active about my money and money-related decisions I've been able to change negative thoughts regarding money into positive ones. Luckily, we can get past these mistakes and move on with our lives!
18 Money Mistakes We've All Made and Can Totally Get Past…
1. Spending without thinking
Failure to create or maintain a spending plan is one of the most common mistakes people make and one of the reasons people make a lot of other mistakes financially. Not knowing where you stand financially means you’ll end up spending more than you can afford. (This is how I got into the bulk of my debt. By doing starting the Spending Fast I was able to finally stop the cycle.)
2. Impulse buying
Spending money on impulse buys can drain a lot of cash out of your wallet. Make a list before you go shopping and stick to it. (Related: Being Frugal is Better than Shopping)
3. Not checking receipts
When you use your credit card, debit card, or even cash and fail to check the receipts you may be losing your own cash. Failure to check the prices for items you purchased means you could be overcharged on items like those that should be on sale but rang up differently.
4. Not opening bills
When your mail arrives and you leave your bills sitting unopened for days or weeks at a time, you can be losing money in two ways. First, missing due dates means you’ll be spending more on late fees and interest charges. Second, your billing statement could be incorrect and if you are not reviewing the information, you’ll never know you are spending more than you should be.
5. Failure to review bank changes
Banks have made a lot of changes and if you have been a loyal customer for years, you may have become so complacent that you have no idea how much you are paying in service fees and how much money your bank is actually costing you each month. You should routinely make it a point to see what else is out there among the competition. You may find a bank or credit union that is more effective for you and your money and cost you less in service charges and fees or provide a higher rate of savings interest.
6. Carrying balances on credit cards
It is good to use your credit cards but only if you are doing it in the right way. Whatever you spend on your credit card each month should be paid off in full at the end of the billing cycle. This will ensure you are not paying additional interest charges or late fees for carried over balances. Put only on credit what you actually have in cash to back up the charges.
7. Failure to review insurance coverage
Like your banking practices, you may have become complacent about your insurance coverage for your home, your vehicles, your health, and your life. Over time, your life changes and so do your insurance needs. You need to make sure you are updating your insurance policies to reflect your current life and your needs. Failure to do regular review may mean you are paying for coverage you don’t even need or missing coverage for things in your life that have changed.
8. Not refinancing a high-interest mortgage loan
If you were approved for a mortgage years ago at a rate of interest that is in the higher range and have not considered refinancing, you are paying a lot of extra money each month for no good reason. Provided your credit score is good and you have explored your different refinancing options, you may be able to secure a lower interest loan and pay out less each month on your house note. (You might also like: Our Foreclosure Buying Story)
9. Not properly planning for retirement
When you start working you should start considering the time when your career will come to an end. It may be that you have decades to go until the age of retirement but the earlier you start saving, the more money you can accrue during your working years to provide you with a more comfortable retirement.
10. Ignoring fees
There are all kinds of fees you may encounter every day. From fees at the ATM to service fees for paying your bills, you need to be aware of what you are paying ‘extra’ for and find ways to prevent it. For instance, using a bank ATM that is not part of your bank’s network could cost you up to $5 for each transaction. That may seem like a small amount to pay for convenience but that five bucks would serve you much better in a savings account than in the hands of a company out to make a profit. Plan ahead so you can avoid the many unnecessary fees plaguing your wallet.
11. Failure to comparison shop
There is so reason why you should not be looking around for a better price when you are in need of something. With the Internet, you have access to the wide world of retail and should take the time to find the best pricing especially when buying big-ticket items. Compare prices before you spend and you may find you could save hundreds or thousands of dollars over the course of a year and still get exactly what you need. (You might like to this post: Confession: “I Have an Addiction to Target”)
12. Not keeping tabs on credit score
Credit scores are the report card of the personal finance world. If you are not checking in with your own credit history, you can never be financially secure. Credit reports often contain mistakes that negatively affect your own financials so make sure you order a report once or twice a year to review the data being reported. You also cannot make good financial decisions if you do not know where you stand credit-wise. Poor credit scores mean you will be paying more money for things like insurance and credit card purchases. (Related: 87K in debt with a Love of $500 Shoes)
13. Failure to pay yourself first
When you receive your paycheck, it is important that you pay yourself first before allocating the rest of your cash to your creditors. The general rule of thumb is to have 10% of your income put into a savings account and let it alone. Automating that deposit from each paycheck is a great method for ensuring you don’t spend the cash before you can save it. As your pay increases and your debts are eliminated, raise the percentage of what you are paying yourself for more financial security in the future.
14. Missing out on tax deductions
Tax time can be chaotic but if you implement a system to save and organize deductible receipts and other tax information throughout the year, you can be much more effective at qualify for the various tax breaks being offered. If you are unsure of the tax laws or have little patience for the tax process, pay a professional to do the work each year to ensure you are getting back what you deserve and not giving the government free money.
15. Always buying new
There are so many ways to get what you need without having to pay high sticker prices for brand new items. Buying pre-owned items including furniture, cars, and even clothing can help you save a significant amount of money throughout the year. Consignment shops, online auctions, and even local garage sales can net you some great things for just a few bucks. (You might like this post: 18 Ways to be a Savvy Summer Saver)
16. Failure to ask for a deserved raise
When you work hard for your money but your employer is lax in recognizing your efforts, it may be time to speak up and ask for the raise you deserve. Get your ducks in a row before approaching management about an increase in pay. Put together a highlight reel of your accomplishments so your request for money will be seen as valid and justified. (Related: An Interview with Financial Expert Farnoosh Torabi)
17. Spending a windfall recklessly
If you win a lottery, claim an inheritance, or get an unexpected bonus check at work, you should fight the feeling of that money burning a hole in your pocket and take the time to investigate the various ways it could be used for your full benefit. While many people consider windfalls of cash to be ‘extra’ money to have fun with, the reality is a nice chunk of change could serve you very well if used wisely such as by eliminating debts, investing, or saving the full amount. (Related: “I Won 6 Million in the Lottery!”)
18. Falling for scams
This money mistake is one that many have fallen victim to and tend to feel long-term guilt about for many years to come. The reality is scammers are getting very good at what they do and being tricked into giving out your personal information or your money is not uncommon. More sophisticated scams means you need to pay more attention to your money matters and be critical of any situation that makes getting rich seem easy.
We've all done at least a few of these. Which ones have you done and are there any money mistakes that should be included on the list?