I don't know if anyone goes through life without making a few money mistakes. I've certainly made my fair share: shoes that look great on the shelf but hurt when you wear them for more than five minutes. Those jeans that will look magnificent once you lose 10 pounds but then never do. While I have some money regrets, I'm also grateful that I know better now.
4 Common Money Mistakes
While my experiences may be unique to me, these are still very common money mistakes. They can wreak considerable financial havoc in your life, but they are also readily fixable.
Money Mistake #1: Not Following a Budget
Budget used to be a dirty word in my home. I hated them. They felt restrictive and brought out my natural defenses. Plus, I told myself that I didn't need to budget. I lived within my means and had no debt, so why did I need a budget?
3 Big Reasons Why I Needed to Budget:
- Upon closer examination, I really wasn't living within my means. While I paid my credit card bill in full every month, the reality is I shouldn't have had a bill in the first place. I wasn't using my card on regular expenses to earn reward points. I was simply buying whatever I wanted. Sometimes I even needed to dip into my savings to pay my credit card bill. D'oh.
- I had no real idea on how I spent my money. It was just gone by the next paycheck.
- I really wasn't spending my money on what mattered most. More on this later.
Clearly, I needed to budget but detailed spreadsheets overwhelmed me and made my eyes twitch. Eventually I stopped using that as an excuse. The truth is following a budget is more important than the type of budget I use. My budget is super simplistic but it keeps me from overspending and helps me make smart money decisions.
Money Mistake #2: Not Having Clear Goals
The old me had vague goals. I was saving for retirement, although I didn't know when or what I wanted to do. I was saving for a house, even though I had no timeframe and mixed feelings about being a homeowner. I wasn't motivated at all to achieve my goals because I really didn't have any that inspired me to save more or change my money habits. This is still a work in progress for me. My goals continue to evolve, which isn't necessarily a bad thing, since I want to be fully committed to achieving them.
Money Mistake #3: Not Being a Conscious Spender
When I look back at some of the things I bought, I can only shake my head. My emotions drove much of my spending. I told myself "I deserved this" or shopped because I was bored. These days I don't allow my emotions to control my money; I do and it feels great. I comparison shop and look for bargains on the things that I need, so I can save money for the things that I truly want. This has been one of my greatest lessons. My budget may be smaller today but I am also much happier now that I am a conscious spender.
Money Mistake #4: Not Investing Sooner
I remember receiving the 401k enrollment forms as part of my benefits package when I started my first job. I had no idea what a 401k even was! Naturally, I tossed those papers aside and forgot about them. Finally, when I was 28 years old, I enrolled, which isn't a terribly late start, but knowing what I know now ... boy, do I wish I would have enrolled earlier.
Additionally, because I wasn't following a budget, I didn't realize how much I was under-investing. I just spent my money mindlessly when I could have re-directed that money towards my goals. I realize now how much my delay in investing and not contributing what I truly could afford cost me. My money would have had plenty of time to compound and grow before I needed it.
A More Money Savvy Me
I can't undo past mistakes but only learn from them, and I am happy to say—lessons learned. Now I understand how my money decisions impact my well-being, so I no longer rush decisions or let my emotions overrule my priorities. Money no longer intimidates me, and I make choices that honor my goals.
Your Turn: What Are Your Biggest Money Mistakes?
I've shared mine, so now it your turn to share some of your money mistakes.