Common Financial Mistakes and How to Avoid Them
Finances are a challenge. Whether you’re in your 20s and paying off student loans or in your 40s and trying to save for retirement, financial decisions can be complicated.
The good news?
There are steps you can take to avoid the most common mistakes so you have more peace of mind when it comes to money management. Here are some of the most common financial mistakes people make, and tips on how to avoid them.
Caring too much about what others think
This may be the tough love you need to hear. No one judges the car you drive. Or the watch on your wrist. Or the size of your home. And the one-in-a-million person who does? They’re a narcissist with WAY bigger problems than your car.
But that fear is powerful for a reason. It’s been carefully nurtured by TV commercials and Instagram accounts with a singular goal—to make you buy things you don’t need. Know this—you’ll gain far more respect by attending to your own financial needs than by desperately trying to keep up appearances.
Not asking for help when you need it
Let’s face it—you’re supposed to know how money works. Mastering your finances is symbolic of becoming an adult. There’s tremendous internal pressure to act like you know what you’re doing.
But were you taught how money works? Did a teacher, professor, or mentor ever sit you down and explain the Rule of 72, the Power of Compound Interest, or the Time Value of Money? If you’re like most, the answer is no. It’s a cruel double-bind—to feel good about yourself, you must master skills no one has ever taught you.
And that keeps you from asking for help. You get caught in shame, denial, and confusion. It’s hard to admit that you don’t know something that seems so basic, so essential.
But rest assured—you’re not the only one. And the right mentor or financial professional will listen to your story without judgement and seek to help you.
Procrastination
There are few things more daunting than staring at a pile of bills, an empty bank account, or an intimidating stack of paperwork. You know what you have to do. But it doesn’t happen because you’re so overwhelmed by the task ahead. And it’s especially daunting if you’ve never been how money works—you don’t even know where to start!
But nothing causes financial damage quite like procrastination. That’s because it causes exponential damage. Your bills pile up. Your interest rates rise. Your savings fall drastically behind, and you must save far more to catch up.
The antidote?
Break the task down into smaller, manageable steps. Maybe that means signing up for Mint.com or working with a financial professional. That might mean automating $15 per month into an emergency fund, or cooking one dinner at home each week.
It doesn’t matter how small it is, as long as it puts money back in your pocket and stops the scourge of procrastination.
In conclusion, making financial mistakes is something that can happen to anyone. By knowing some of the most common financial mistakes people make and what you can do to avoid them, you’ll have more peace of mind when it comes to money management.
