Do you know that many people make common money mistakes that can easily be avoided? Here is a list of the 10 most common financial mistakes people make, and how to avoid them. And, if you’ve already made those mistakes, we’ll talk about how to recover!
10 Money Mistakes To Avoid
What personal finance mistakes should everyone avoid? There are quite a few. You may be surprised to learn that you’ve committed some of these mistakes (I know I have!).
But, the great thing about personal finance is that you can make changes at any time in order to be better with your money. Let’s talk about that.
What are the biggest money mistakes youth often make?
Let’s forget about the big topic of the top 10 common money mistakes. Let’s talk about the big ones!
What are the biggest money mistakes made by teens (and younger)?
First, let’s talk about the youth years, and some financial mistakes teens make that can be avoided. Of course, teens aren’t always in control of their finances, and many only have gig money or part-time jobs for extras. But, it’s never too early to start your personal finance journey.
If you’re in your youth, do your best NOT to make the mistakes below!
I was a saver my entire life, but my sister was a big spender. Recently, she shared a big regret with me… she wishes she would’ve saved more of her paychecks in high school. Instead, she would blow her money as soon as she made it.
Now that she’s in the military, she’s more stable in her finances, but she tells me that she probably spent thousands of dollars on “crap she didn’t really need”.
As a teenager, it’s easy to get caught up in materialism when your needs are taken care of by your parents. But, a common mistake teenagers make is not saving any of the money they earn. Even if you save just 10% of a $200 paycheck each week for four years, that can equal up to more than $4,000. Not bad for $20 a week.
2) Not Preparing For College
I understand that many kids won’t grow up and go to college, or at least won’t go to college right after high school. But, planning while in high school can really help teens save money in the long run.
- As an example, I participated in many extracurricular activities just for the scholarship opportunities.
- I also looked into financial aid.
- And, I tried to find colleges that rewarded me for my good grades.
By doing this, my first year of college was completely paid for through scholarships, financial aid, and a job as the girl’s basketball team manager.
Now, I was living completely on my own before the age of 18, with no help from my parents, so I had to put in more time and effort into making ends meet as a college student. But, I don’t regret searching for scholarships, taking community college courses to save money, and focusing on schools that would help me stay out of debt.
If a teen plans on going to college, there are many ways to save money, stay away from student loans, and make their personal finance journey easier.
Financial mistakes in your 20s
Now, let’s talk about the financial mistakes people make in their 20s. Usually, your 20s is when you first really start managing your money on your own. Because of that, it’s easy to make mistakes that can affect your financial future. Here are a few.
A budget doesn’t have to be restrictive. In fact, it can offer you the freedom to spend your money on what you value.
But not having a budget can cause you to…
- spend money you don’t have
- miss paying bills
- And, worse case scenario, it can put you into massive amounts of debt
Making a budget doesn’t have to be hard. In fact, you can start with a simple 80/20 budget. Then, once you get comfortable managing your money, you can create a more detailed budget that helps you manage your money on your terms.
4) Overspending On Wants
Speaking of overspending, many people in their 20s tend to overspend. It’s so easy to get wrapped up into your new “big boy/girl” job and buy all of the things that you’ve always wanted.
But, if you’re not careful, this can turn into buying things you really don’t need, with money you don’t have. For example, spending just $10 on lunch eating out twice a week can equal to $1,040 in spending a year. And that’s just on eating out!
This is why having a budget is so important. It allows you to save, spend, and invest, without overspending in any one category.
5) Not Checking Your Credit Report
In your 20s, building your credit may be an important goal. Without credit, many people can’t get a car loan, credit card, or even mortgage. But, even if you’re careful with your credit, identity theft or errors can affect it if you’re not paying attention.
Not checking your credit is one of the biggest money mistakes you can make in your 20s, especially because it’s completely free to get a credit report from the three credit bureaus once every year.
That way, if you see errors or suspicious activity, you can stop it in its tracks before it affects your credit score for years to come.
Money mistakes to avoid in your 30s
By your 30s, you may think there aren’t many other money mistakes you could make. But, there are still a few that you should avoid.
Below are the top money mistakes to avoid in your 30s:
There is always something that you can learn or grow with when it comes to financial education. In fact, I’ve been a personal finance writer for over six years, and I’m still learning.
If you stop your financial education at keeping a budget and not overspending, you are missing out on so many other benefits to managing money.
Investing, FIRE, and house hacking are just a few terms and examples that I’ve learned in my own personal finance journey. By continuously learning and growing, I’ve been able to tailor my personal finances to meet goals that I never even thought possible before.
In your 30s, one of the worst things you can do is not look into what your money can really do for you now that you know how to manage it.
7) Not Investing
Another big mistake that many people make in their 30s is not investing. While it’s best to start as early as possible (starting in your 20s is ideal!), I also understand that life happens. Student loans, starting a family, and even buying a home are big adjustments that many people have to make in their 20s.
But by your 30s, you’re usually settled and stable enough to start investing, even if it’s just a small percentage of your paycheck each week.
And if you’re not taking advantage of compound investing or even your company’s 401(k) match, you are missing out on thousands of dollars in retirement.
8) Buying A Home
Last but not least, another big mistake people make is buying a home in their 30s. Now, this is not to say that buying a home is a financial mistake. However, buying a home that costs too much money, costs too much to fix, or that doesn’t fit all of your needs is a mistake.
Related: Your House is a Terrible Investment
For example, many couples buy homes based on both of their incomes. But what happens if someone loses their job, or if a parent needs to stay at home after the birth of their child? If you planned for both of you to be making an income, you may find that you can no longer afford the house you purchased.
No one wants to throw money away, which is why it may seem appealing to buy versus rent. But sometimes, renting can actually be the better option, depending on how you want to live your life.
So, before making a huge and life changing decision of buying a home and get a mortgage, make sure it works for you.
What Are Some Common Money Mistakes?
We’ve talked about 8 of the 10 most common financial mistakes people make, but we still have 2 more mistakes to talk about. And, these are some of the worst mistakes someone can make in their personal finance journey. Let’s talk about them.
Worst Money Mistakes
What are some of the worst financial decisions that someone can make? They may or may not surprise you. Here they are.
Life insurance isn’t for you. But, if you have a spouse or family, it’s to help them put you to rest and receive compensation that can help them continue their lives in your absence.
I don’t believe that anyone wants to die and leave their family in a financial mess, but that’s usually what happens when you don’t have life insurance. For example, take a look at many of the GoFundMe’s that are created after someone passes away. It’s heartbreaking to know that a family struggles when simple life insurance could have made a difference.
And, life insurance doesn’t have to be expensive. I pay just $30 a month for $750,000 in coverage.
If I die, that will be split equally between my husband and daughter. My husband also has life insurance, and we pay about $20 a month for his. It gives us peace of mind to know that our daughter will be taken care of if we die.
Life insurance doesn’t have to be hard to obtain or expensive. Shop around and find a plan that works for you, and make sure to write down any beneficiaries. Which brings me to my next money mistake…
10) Forgetting A Will
I’ve seen it in the news so many times — family fighting over who gets what, what debt needs to be paid, and who deserves whatever money is left.
- Who gets the house?
- Are the cars paid off?
- What about that ring that’s worth $10,000?
By not creating a will, you’re leaving it up to the state to sort through your finances for you when you die. And again, this may not affect you directly, but it can have dire consequences on your family.
Instead, make everything clear and to the point by creating a will that will serve as your last word when you pass away.
10 Most Common Financial Mistakes – Recovering From Financial Mistakes
You may have looked at this list and realized that you’ve made many of these 10 most common financial mistakes. But hope is not lost! In fact, all of these mistakes can be corrected. The key is to be ready to make the change.
Recovering from financial mistakes can be embarrassing, expensive, and even hard. But it can be done. Don’t be afraid to dive in and make changes where you can, and not harbor on the negative.
Almost everyone reading this has made at least 1 of these 10 most common financial mistakes, so you’re not alone. But I know we can all do better.
What can you do better? Will you commit to stop making these common financial mistakes??
AUTHOR Kimberly Studdard
Kim Studdard is a strategy consultant and course launching expert. When she isn't spending time with her daughter and husband, or crying over This Is Us, you'll find her teaching other mompreneurs how to scale their business without scaling their workload.