Today’s post is from our regular Wednesday contributor, Cat.
I regularly write about my own money mistakes, from the time I paid 3 rents in one month to my crushing student loan debt.
However, I’m happy that I’ve wised up over the past few years and have been able to help others avoid common money mistakes, like the ones I’ve rounded up below.
1. Incurring Late Fees. Always set a reminder on your phone or create automatic withdrawals.
2. Not Having a Budget. Set one up today. It will only take you a few minutes, and you can use a simple excel spreadsheet or an online program.
3. Neglecting Your Company Match. You’ve been meaning to update this with your HR department for months now, right? It’s time to head over there and make sure that you are getting as much of that free money as possible.
4. Being Impatient About Your Savings. Just like anything worthwhile, building wealth does not happen overnight. Instead, celebrate the small victories, and take it one day at a time.
5. Loaning money to friends and family. This one can be debated, sure, especially if you are a parent who is helping their child. However, I know from experience that when you loan money to a friend, you probably won’t get it back. We recently loaned $200 to a friend who was having a really hard time, but my husband and I agreed that it was more of a gift than a loan. We don’t expect to ever get it back, and it’s better that way.
6. Playing the stock market like a wild child. Lots of people are interested in getting their investing feet wet, but it’s not something you should do unless you spend a considerable amount of time planning and learning about how it works.
7. Taking out too many student loans. I wish I would have avoided this mistake like the plague. As many of you know, my husband and I will have over $300,000 of student loan debt combined to pay back starting in two years. We’ve done the best we can with living on less, but I definitely took out too much in my younger years.
8. Saving cash in buckets. Like, literal buckets. I have a family member who does not trust banks and keeps all his savings in cash in his house. This was a big problem when Hurricane Katrina hit, and he had to go back and look for his life’s savings. Always put your savings in a bank, preferably in a high yield savings account or other investments.
9. Choosing stocks because they are popular. Warren Buffet is famous for saying invest in what you know. So, just because someone on the news is talking about a new technology stock does not mean you should go out and buy it. Always take the time to research and understand your investments before taking the plunge.
10. Buying a home you can’t afford. People young and old often fall into the trap of lifestyle inflation. It’s natural to want to upgrade your house, but if you can’t afford it, it’s not worth the stress.
What are some other common money mistakes that people make?
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We’ve been asked to loan money to family member before and not just like a few hundred dollars either. It was really awkward but it forced us to come up with a plan. We basically have a no-can-do policy on this area. I feel bad but we just aren’t in a place where we can afford to be borrowing money.
Honestly I think it’s for the best!
Savings in buckets?!? … Then again, I know of someone who hides over 15k around his house for emergencies. It’s like the opposite of insurance.
Wow that’s a lot to hide!!
Did your family member find all of his cash savings? I would be scared of a fire too!
I believe so. It had a lot of drying out to do!
This is a great list! I would add to it thinking of your credit card as part of your income. I know a number of people who overspend because of the false income net of their credit card.
Oooh that’s a good one!
Buying a home you can’t afford is a good one….I know we fell into it. When we built our home we went with the absolute max the bank would lend to us. After 10 years of salary increases and paying off a ton of debt it’s not as much of an issue now…but it was when we first built it!
I love how you held on to it though!
I worked with a client who had me talk to his mother. She’d been robbed because the neighbors found out that she kept money in the basement in mason jars. Not a great idea.
What!! That’s bananas!!
I actually worked with an insurance rep who had a client that buried his cash savings under his toilet…I kid you not! He met with the client one day and he was selling him a maxed out UL certificate, which is another mistake, but the client went to his bathroom, pulled back the tiling and dug out roughly $130k – nuts!!
OMG people are so weird!!!
Taking out too much in student loans is definitely a mistake that I made. Luckily, I didn’t have too too much (okay $40K is still a lot!), but I was able to pay it all off last Summer.
You’re such a rock star Michelle
I was definitely guilty of #1 and #7, but thankfully I’ve gotten my finances in order. Those late/overdraft fees are a total killer! I honestly probably spent close to $1000 I absolutely did not have on them, just because I was a plain ol’ idiot.
We’ve all made them!! :)
Boom, boom, boom (well to all 10 of them). Excellent points, Cat. #3 makes me want to throw myself dramatically on the floor and flail about like a toddler having a tantrum. WHY not get the free money?! I’ve been guilty of #2 before.
Ha! Excellent visual!!! Lol!!
Loaning money to family and friends is really tricky. I try to avoid that like the plague. I usually don’t have people calling me for money but it has happened 2 times. And both times I offered to give them gifts of far less than they were asking for. One person took it the other declined. I rarely talk to either of them now. I think it changes the relationship once people start hitting you up for money.
Yeah I feel like they have to be in a really tough spot to even ask in the first place.
Lending money to friends is tough. You have to do it like you guys and expect the money to never come back. I would only do it for a handful of people, and family.
Exactly. You just have to give it willingly and not hold a grudge.
There are a lot of conspiracy theory nuts around here who hide cash at home, but usually in a fireproof safe. That’s crazy to put money in a bucket or under the toilet or anywhere at home. What if you got in an accident and lost your memory and no one knew where to find it?
Then the next homeowners would be realllly happy lol
I have done some of these mistakes but I learned the hard way and I am more careful nowadays. Lending money is very tricky because the closer the person is to you, the more you feel like helping out and on the other hand the more they might not be in a hurry to pay you back
Yes! Ugh I hate the lending money to friends thing!
Being patient about your savings is a huge one! It’s definitely easy to get frustrated and either give it up or take on too much risk if things are going as fast as you’d like, but either one is a path to failure. Time and pressure. That’s all you need.
Yes my thoughts exactly!!
The comment about saving money in literal buckets was shocking to read. I can’t even imagine the stress of having my life savings at risk from a natural disaster. Did he end up finding it?
I believe he got most of it but had to dry it out!
Neglecting your company match, if it’s offered, is turning away free money. If possible, contribute enough to receive the full match each year. This helps your portfolio make great strides in reaching retirement goals. I, too, am curious to hear more about the bucket story.
Ha well it’s a family member so prob shouldn’t out them on the interwebs ;)
Buying a home you can’t afford— I see it on house hunters ALL the time and I scream at the TV!
I can’t watch! Drives me bananas!
I agree it’s important to research before making investments, don’t jump on the bandwagon with whatever seems popular at the time
So true! Gotta look it up yourself!!
Not keeping up with regular car maintenance and having it cost more in repairs. Guilty.
Ack I hate paying for car maintenance!
Interesting, I just so happen to have a post going live TOMORROW about lending money to family ;)
Omg that buckets thing is nuts. I would flip out! In some ways I wish I didn’t go to such an expensive grad school. I also wish I started saving for retirement soon. I think it’s super easy to make mistakes with money, so it’s best to live and learn, and get educated!
But I want my savings to grow faaaster! I am impatient when it comes to savings, I want to see them multiply overnight. A girl can dream, right?
My great grandma had a literal mattress with money, too. She also had undiagnosed/treated paranoia… which was a part of the problem.
I know a lot of people who have bought homes they can’t afford and are now in a big financial mess. Thankfully I’ve been able to avoid most of these mistakes except 7 and 5 (learned my lessons there)
Neglecting the employer match drives me absolutely crazy! You won’t even notice the money is missing and you’ll be getting free money!
Oh my god, buckets?! How odd!
I enjoyed the post, but as for #8, truly, I wouldn’t trust banks with all of your money. While I agree that buckets are a terrible idea, there are safer ways to keep some cash out of the bank. Even if you use money orders, made out to yourself, instead of cold hard cash… those are replaceable if lost or stolen. Banks really do some shady things. I hope I don’t sound too paranoid!
Not only is buy a home you can’t afford, you also can buy a home you REALLY didn’t need. A person who is single does not need a home that’s three times as large as they need. The hidden costs such as heating/cooling a larger house and the water bill can be costly for some which can eat into the money that person could be using to build wealth or pay off debt.
“Saving cash in buckets” – yikes!
Buying stuff you don’t need at Target/Costco/etc. is a big one. I mean, I love the massive jar of chocolate covered raisins that magically shows up right before the register, but make 5 other purchases like that, and the number on the receipt starts to look like regret.
I would include paying credit card interest. You need to try and avoid credit card interest at all costs since the interest rates are so high!
I have to say though, #8 is my favorite. I’d think everyone would keep their money in banks but I’m sure there are more than I’m aware of that don’t!
Great post!! One of my biggest financial mistakes was paying for an 18-month gym membership that I used about three times. Total waste of $1800+, but lesson learned that I’m never joining a gym again!!