Money might not be everything, but it’s undoubtedly an essential part of life and happiness. You don’t necessarily need riches to be content, but you need stability to be free of worry and stress.
Most people make a few mistakes when it comes to their finances. Unfortunately, it’s all a part of life. However, learning from those blunders and improving is the best way to get ahead. In this post, we’ll talk about the most common mistakes that can cause havoc in your finances, no matter how much you earn.
1. Living on Credit
Living on credit is the number one money mistake that most people make. Using credit for day-to-day life is a fast route to disaster. Paying for everything on credit ups the price immediately, and if you’re not disciplined enough to clear what you spend each month, you’ll quickly build up a frightening amount of debt.
Use cash or debit cards whenever possible or a credit card that you’ve set up to be paid off every month. However, if you need credit for everyday necessities, you’ve got a deeper financial problem that needs addressing urgently.
Consider working with a free consumer credit counseling agency to help you tackle some of that debt and regain your financial freedom.
2. Buying a New Car 
Taking the credit fiasco a step further, using credit to buy things that depreciate in value is a poor decision. This is especially true when it comes to big-ticket items like new vehicles. While it is sometimes unavoidable, you’ll be hit with a double whammy as the asset (your new car) loses value while your debt attracts interest.
Instead, consider purchasing a late model vehicle. And if you must finance it, look at the terms carefully to ensure you are not overpaying in interest. The old adage about new cars losing their value as soon as they are driven off the lot is still true today.
3. Only Making Minimum Payments
Even if you only make the most sensible credit purchases, you can still run into trouble when paying them off. Only ever paying the credit card minimum amount is a serious mistake. The interest will swallow almost all of your payment, and you will be treading water expensively without reducing your debt.
Pay your balance in full if you can, but if this isn’t realistic, every little extra amount you pay over the minimum makes a useful difference. Try to get out of debt as soon as possible. You’ll be amazed at the freedom it brings.
4. Having Too Many Credit Cards
Don’t apply for credit cards on a whim. A new card stuffed with offers might seem like an excellent deal, but every extra credit card you have is storing up temptations for the future. If you really need a new card with better features, be sure to close your existing account afterward to keep your finances tidy and manageable.
5. Falling for Impulse Credit Deals
In the same way, don’t be tempted by easy ‘buy now, pay later’ purchase deals. Using credit on impulse purchases like this can lead to debt problems sooner rather than later. Think twice, and even if you do decide to use credit for a purchase, at least you’ll have considered your decision thoroughly first.
Credit deals are often offered on big-ticket items like appliances, furniture, or electronics. While having shiny new things is exciting, even new things lose their luster quickly. Instead, consider shopping around for a second-hand version of the item you want. You might find something of much higher quality for a lower price.
6. Not Looking for Ways To Earn Extra Money
Not all money problems can be solved just by increasing your income, but you can certainly take the pressure off by bringing home a little extra cash. However, if you are not actively looking for ways to earn more money, you’re missing one of the best chances to have a financially secure future.
Consider a side gig like meal delivery, dog walking, or taking surveys for cash. There has never been a better time to start a side hustle or bring in some extra cash. The demand is tremendous, and wages are at an all-time high. If you aren’t at least considering an additional income opportunity, you’re leaving money on the table.
7. Not Having a Rainy Day Fund
Another significant mistake people make when it comes to their finances is not having any emergency savings. Don’t leave yourself in a situation where an unexpected bill could floor you financially. Instead, concentrate on building up a rainy day fund, even if it’s just a few dollars a month. If you need to take out fast credit to pay for an emergency, the cost will be prohibitive, so aim to keep a buffer of whatever size you can manage.
8. Having Large Fixed Expenses
Just as important as an emergency fund is leaving a little leeway in your budget. Don’t commit to fixed monthly expenses that leave you close to the edge. For example, it’s okay to splurge on an expensive gift or occasion now and then, even if it leaves your bank account a little empty. But rein in your expectations and be reasonable with your purchases. Keep your regular expenses well within your budget to give a little breathing space if your circumstances change.
9. Putting off Retirement Planning
Don’t put off your retirement planning any longer. It might be a boring topic to start looking at, but time passes quickly. And the earlier you begin, the more the miracle of compound interest will boost your investment’s value. On the other hand, every few years’ delay means the task of saving enough to retire comfortably is much more challenging.
10. Holding Inaccessible Investments
When planning for retirement, though, be careful not to tie up wealth in long-term investments you can’t easily access or which would lose too much value if you’re forced to sell early. In almost all cases, credit costs more than investments earn, so keep some wealth where you can get at it fast without needing to borrow.
11. Making Unrealistic Investments
Don’t be tempted by juicy investment opportunities unless you really understand what you’re doing. Even friends can mislead you unintentionally when trying to pass on a nugget of good news. If anything looks like an unmissable opportunity, someone somewhere is making a fortune, but it’s not likely to be you.
12. Borrowing for Investment
Never borrow to fund an investment. You can’t win at that game; it’s rigged against the little guy. Apart from exceptional circumstances, your investment gains will be dwarfed by your credit costs. Of course, this is not the same as borrowing for a small-business startup, which, while risky, has more of a chance of success in the end.
