9 Common Money Mistakes to Avoid

Everyone makes mistakes. It is no different when it comes to your finances. But the good news is that you can turn things around. Small, smart changes can lead you down a more secure financial path and really add up over time. With awareness, preparation and planning, you can avoid these common money mistakes and turn financial troubles into triumphs.

1. Not paying bills on time

If you miss a due date on occasion, you’re not alone. A 2020 survey by the National Foundation for Credit Counseling states that roughly 1 in 4 American adults don’t pay their bills on time.¹ In addition to being late on your account, these actions could lead to other financial issues.

One major consequence of late bill payments could be a drop in credit score. Payment history is important to credit scores, and even one payment that reaches 30 days past due can have an impact. If you need help paying your bills on time, try setting due date reminders on your phone, writing them on a calendar or (best of all!) setting up autopayments with your lenders.

2. Not paying down credit card debt

Racking up credit card debt is one of the easiest financial issues to sneak up on people. A shopping trip here, a dinner with friends there, and suddenly your balance is growing faster than you expected. If credit card spending becomes a trend, you might be shocked the next time you receive your monthly statement.

If you have high credit card debt, the first step to paying down your balance is to stop using the card. Interest is typically charged on your existing balance, so carrying a large balance from month-to-month can be costly. In addition to not using the card, make your payments on time and try to pay more than the minimum due. Here are more ways to dig yourself out of credit card debt. Also check out the debt snowball method to paying off what you owe. Before you know it, you’ll be in a better spot.

3. Not having an emergency fund

A tree falls on your car. Your washing machine breaks. You suddenly need a root canal. There are many situations that could qualify as a financial emergency. It’s not a matter of if but when you will need emergency cash.

That's why creating an emergency fund can really pay off. When an unexpected situation arises, a stash of cash could help you cover costs without touching your primary checking and savings accounts. You’d be able to focus on the emergency at hand without losing sleep over how to pay for it. Socking away a little at a time can be a huge help in a time of unexpected need.

4. Not saving for retirement

According to one nationwide survey, 56% of Americans worry they won’t be able to achieve a financially secure retirement.² Compare that to a study showing that most individuals will need at least 80% of their final pre-retirement income to maintain their current lifestyle during retirement.³

With all that in mind, the earlier you start saving, the better. If you have a target amount you want to hit, you need to create a plan and get started. If you’re currently saving but don’t feel confident that you’ll have enough, take a good look at your projections and make adjustments where necessary. For additional tips, check out how to start planning for retirement. Then have fun watching your nest egg grow.

5. Not living within a budget

If you think making and staying within a budget is tedious, rewind to the stress of not being able to pay bills and buy essentials. But turning things around is easier than you think! Here’s a free budget calculator to help you map out the cost of daily life and stay within your means – plus set money aside for education, travel, savings and emergencies. The satisfaction of seeing the numbers work in your favor may heavily outweigh the sacrifices you may have to make.

6. Expensive and unhealthy habits

Smoking. Happy hours. Being food delivery and restaurant regulars. What seems like fun delivers a whopping cost to your budget (not to mention your health). According to the National Cancer Institute, the average cost of a pack of cigarettes is $6.28, which makes a pack-a-day habit a $188 per month or $2,292 per year habit.⁴ And that’s just the average. Imagine what you’d save by quitting smoking, having drinks at home with friends, and cooking for yourself a little more often. You’ll see extra room in your budget – and maybe in your waistline.

7. Impulse buying

Emotional decisions in a store, car dealership or online are often expensive ones. Ask yourself, do you need it? Will your budget bear it? Can you find a less expensive alternative? At the very least, look for coupons and promo codes and do the comparison shopping that’s so easy on the internet. Also consider the 24-hour rule: delay the purchase to see if it holds as much magic the next day. Avoid impulse buying, and you may walk away happier in the long run.

8. Not preparing taxes correctly

When it comes to preparing your taxes, simple mistakes could cost you serious dollar signs. Whether you do your taxes by hand or via the internet, ensuring that every detail is correct could pay off when you get your return. Here are some common tax mistakes to avoid:

• Not filing on time
• Missing or incorrect information
• Mathematical errors
• Filling out the wrong forms

For more information on credits and deductions, here’s an IRS resource.

9. Not having a will

Writing a will isn't something most people like to think about. In fact, according to a Gallup poll, slightly less than half of Americans ages 50-64 don't have a will. No matter how uncomfortable it may seem, taking the time to write your will can save your loved one's time and money in the future.

Documenting your wishes on paper may also keep your heirs and surviving family free from unnecessary legal hassles and confusion. Most of all, it should give you peace of mind that your possessions and money will end up in the right hands. Make time today for the gift that keeps on living.

Stay on guard

People make mistakes; it’s a fact of life. However, some issues can be avoided by being mindful and having tools and tricks in your pack pocket. If you identify with some of the money mistakes in this article, make today a fresh start. You can do it. And you’ll love the results.

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1. https://www.nfcc.org/resources/client-impact-and-research/2020-consumer-financial-literacy-survey/
2. https://www.nirsonline.org/wp-content/uploads/2021/02/FINAL-Retirement-Insecurity-2021-.pdf
3. https://www.investopedia.com/retirement/how-much-you-should-have-saved-age/
4. National Cancer Institute. How Much Will You Save?. Updated July 2, 2020.