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This article is all about the money mistakes that you need to avoid.
Do you have anxiety about your finances? Are you scared to log in to your bank account because of what you might see….or may not see? Are your finances a never-ending saga that controls your life and strips away your peace?
I can tell you right now that this is a common story, especially in the United States.
Your credit card is all fun and games until you insert it one too many times and it gets declined in front of your friend that you told you would foot the bill.
If you are a regular patron of Thriving Independently hopefully, these questions would not cause instant sweating.
If you are not a regular patron, I invite you to join the community.
You see, finances are often not taught in households and in institutions, even though money is a critical part of living in modern society.
It may not be your fault that you are ignorant of basic financial principles, but after reading this article, you are now responsible for what becomes your financial future.
If I can show you these basic money mistakes and why you should avoid them, you will be better off than the average people in your age group. This may make you proud, but when you see how low the bar actually is, you may find this to be less complimentary.
Table Of Contents
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- Money Mistakes to Avoid…Like Immediately
- Not Setting Rules
- Making Finances Too Difficult
- Spending Money Before I Had It In My Hands
- Getting Tricked By the Novelty of Money
- Not Doing My Research
- Trying to Time The Market
- Making Decisions Based On the Number in My Bank Account
- Conclusion
Money Mistakes to Avoid…Like Immediately
These money mistakes all can be fixed and put you on the right path to financial success.
As you get deeper into personal finance, you’ll find that the process and principles around making and saving money are quite boring.
Real wealth is built steadily over time. As you continuously build wealth, you will acquire knowledge along with it. This is one of the reasons that fast money never lasts.
If you didn’t gain the skills to earn the money, you also don’t have the skills to retain the money either.
If you learn from and avoid these money mistakes, you will find that the number in your bank account grows easily and your stress about money will go out of the window.
If you liked this post, you’ll love these:
- Starting from Zero | Best Ways to Set Yourself Up for Success
- How to Stop Overthinking and Take Back Control of Your Life
- How to show yourself love on Valentine’s Day
Not Setting Rules
Rules are for your own sake. Rules aren’t very fun, but they are necessary to maintain consistent results.
Not having boundaries or standards for how you handle money can easily explain why some people have a hard time keeping money.
Some people take issues with budgets and would rather take a more intuitive spending approach. I think that people need practice and experience working within boundaries to be effective at intuitive spending.
When you do not set rules for how you will handle your money, you run into these problems:
- Making decisions off on incomplete or incorrect information
- You don’t know the value of a dollar in your financial situation.
- You draw false conclusions.
- You lack urgency.
You don’t want to fall into these issues because money problems escalate exponentially.
Having one setback can have a domino effect on the rest of your finances, which can put you on a different path.
If you learn to manage money while you have a little, making more money will be much less overwhelming and you can steward it better towards your goals.
Making Finances Too Difficult
Another huge money mistake that people make is making their finances too difficult.
Once you get into the world of money tracking, you will find many ways to budget, track, and grow your money. The different investment vehicles all come with different parameters for risk and a plethora of conflicting information.
There is a saying that “scared money doesn’t make any money.”
I would like to modify this saying to “confused money doesn’t make any money.”
If you have your money going to a million different places and you try dozens of wealth-building mediums to try to build your wealth, you’ll find that you will actually lose money!
Do not make this money mistake. If you want to make any progress with your money, you need to set a time frame and have very few goals.
When you have less to focus on, you can see progress and then have the chance to build upon that progress.
As you get older and potentially incorporate other people into your finances through marriage, children, or lenders, etc. your finances will complicate themselves all on their own.
They do not need your help.
Spending Money Before I Had It In My Hands
One money mistake that many people make is misusing and abusing credit, but this section is not even about that.
This section references giving your future paycheck a purpose, usually not a necessity, before it is even in your hands.
In my case, when I was a teenager, I knew on Monday what stationery I was going to buy once I cashed in my check at the bank on Thursday. The problem was that I had no money from the prior paycheck to cover what I wanted to buy.
The money from my first paycheck didn’t stretch, therefore, I was already looking for my next paycheck to fund my spending habits.
This is a terrible habit to build at a young age. In your twenties, your time has probably opened up once you complete school and you can work more hours or have just begun full-time work. You may have access to more money which leads to more money being spent.
This mentality causes you to never have enough money because you spend money at the top of your limit. Luckily, there are ways to combat this, but your way of thinking will stay with you no matter how much you make if you don’t address this bad habit.
Getting Tricked By the Novelty of Money
I am not going to lie to you, I always look forward to payday, and having new money in my bank account is fun.
I don’t care what anyone says.
This boost of dopamine in your brain from having new money in your bank account may cause you to want to spend this newly acquired money. This is one reason that it is crucial to have a plan for where your money goes.
If you do not have a plan beforehand, you are likely to fall victim to your impulses and make bad decisions with your money.
Making money mistakes like these will keep you in the same paycheck to paycheck trap where the money in your bank account controls your life.
If you liked this post, you’ll love these:
- Starting from Zero | Best Ways to Set Yourself Up for Success
- How to Stop Overthinking and Take Back Control of Your Life
- How to show yourself love on Valentine’s Day
Not Doing My Research
Another one of the money mistakes that I see is not doing basic research for myself.
When you read more about money, you’ll find out that the principles of building wealth are very simple.
- Spend less than you earn
- Saving money is important
- 50/30/20
- Have diversity in your investment portfolio
- Compound growth needs a long runway
I wasted a lot of future potential by not being informed and choosing my immediate desires. My 16-year-old self was not trying to hear about delayed gratification.
My 16-year-old self also was not happy when there were only 20 dollars in my bank account and there was a week left until my next paycheck.
Do not be like 16-year-old me and make the same money mistakes.
Trying to Time The Market
Now this is for the people that are interested in investing. New and experienced investors can sometimes make these money mistakes.
Your mind has a way of drawing conclusions based on false or incomplete information. This can be terribly dangerous for your money when it comes to investing.
I heard this quote on The Money Guy YouTube channel.
“The worst thing an options trader can do is win on the first trade.”
Building confidence with a questionable foundation can lead to unideal outcomes.
Dollar-cost averaging is a much safer approach to investing and significantly improves your chances of becoming profitable over time.
Making Decisions Based On the Number in My Bank Account
This is one of the largest money mistakes that I see people make.
It comes down to not having a proper plan for what happens with your money. If you go off of the number in your bank account, you may think that you can afford something.
It is easy to forget that your automatic payment will come out of your account in two days and your bank account will look very different.
This is a fundamental principle of YNAB or You Need A Budget. They are focused on you giving every dollar a job and the dollars that you tangibly have (in the bank or in cash) are the only ones that you assign.
Using their categories, you can realistically see what you can afford to spend and what you have available. It gives you more information about the money in your bank account and prevents you from overspending.
If you can avoid money mistakes like these, you won’t have any problems with overdrafting and you will have much more peace surrounding money.
Conclusion
These are simple money mistakes to avoid to ensure a successful financial future. If you can change these habits while you are young, you can avoid all of the stress that people have about money.
Contrary to popular belief, these problems do not just go away.
They follow you until you learn the lesson, and then you will see a change in your quality of life.
By fixing these money mistakes you can establish a much healthier relationship with money and thrive.
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