It is a fact of life that you’ll eventually make some financial mistakes, if you haven’t already. Everyone makes some money missteps at some point in their lives, and sometimes these seemingly simple mistakes can be significant. But what if you could avoid learning a simple truth the hard way?
Here are some of the biggest financial mistakes we see people make that can end up hurting them in the long run, so you can learn from and hopefully avoid making them yourself.
1. Not Developing a Budget
Regardless of how old you are or your level of income, just about everyone should develop a budget and savings plan. Not having an official financial plan is a huge money mistake! Yet, according to a GALLUP survey, only 31% of U.S. households have a financial plan.[1] Tracking your budget and savings on a spreadsheet allows you to see where you might be overspending and where you could be saving more, and can help you make better financial decisions.
2. Skipping Health Insurance
If you are looking to save money, you may think about stopping your health insurance, especially when you realize you hardly go to the doctor at all. If you want to lower your health insurance costs, you may consider switching to a high-deductible health insurance plan and start putting money into a health savings account (HSA) each month. This lets you save money you can use to cover the occasional doctor’s visit while also protecting you in the event of an emergency.
3. Relying on Credit Cards
When you rely on credit cards just to get from one paycheck to the next, you are going to accumulate a lot of debt. Using credit cards wisely offers protection and points, but make sure you pay them off in full at the end of each month to avoid building interest.
4. Not Contributing to Retirement Funds
Procrastinating saving for retirement only hurts you in the long run. You should be making regular contributions towards your retirement. When you are in your twenties, you have a long way until retirement, and the more you contribute now, the more your money can build over time with the power of interest.
5. Ignoring Emergency Savings
Life is unpredictable. Car repairs, medical bills, or job loss can derail your finances if you’re not prepared. Without an emergency fund, you might rely on credit cards (see #3!) or loans, digging yourself deeper into debt. Aim to save 3–6 months’ worth of living expenses in a separate, easily accessible account. Start small and gradually build your safety net. Even $500 can make a difference. It’s not about how much you save at first, but starting now to protect your future.
Unfortunately, it is all too common to see the mistakes people make when handling their finances. With these five mistakes in mind, hopefully you can avoid costly errors. Making sense of your finances is an important life skill that requires knowledge and discipline.
You may want to consider meeting with a financial advisor to help you develop your financial planning strategy. Financial planning involves detailed savings and investing plans in order to realistically reach your goals. Work with one of our knowledgeable and experienced advisors to plan for your financial future.