What personal finance mistakes should everyone avoid?

[Bethel Victor]

We are humans and there are some things we cant just get our eyes off, everyone has the power to choose what he/she wants.
If you wish to keep for the future then you have to start saying no to those thing you cant resist, money comes slowly by very easy to spend so I'll encourage saving where you cant have access to your money easily.

 

[Bart Simpson]

Individual economic mistakes somebody need to prevent is to be really careful where he or she spending their money particularly online, and that's why I recommend independent presence because if you are doing independent presence you should be able to track it on daily basis.

 

[alibilal5555]

Here's our list of the 8 biggest, common money mistakes to avoid that cost people thousands of dollars and leave them broke every month.

• Using Credit Rather than Cash. ...
• Only Making Your Minimum Credit Card Payments - This Mistake Can Cost You Thousands. ...
• Always Buying Brand New Cars. ...
• Not Paying Attention.

 

[Ayokex]

There are many financial related mistakes someone can make that can have a serious impact on ones life. Some of the mistakes include,spending without caution, spending on impulse and lack of financial prudence. These are very important issue in a man's life.

 

[abubakar3141]

Important life events like getting home, starting a family with children, preparing for retirement are common for many people.
These events deplete your savings and you may have to incur huge debts to pay them off.
It also means that you are living on a paycheck to pay the check and get stuck in a job that you hate.
What's more, retreating without saving is a terrible thought.

 

[Hena101]

There are many financial mistakes that one must avoid as far as finance is concern. Because not avoiding this mistake can lead to you having financial freedom. But the major financial mistakes one must avoid now a days is spending more than your income because this alone can lead you to leaving a life of regret after doing it.

 

[redpogi16]

Not only to invest. You can start a business which ate essential, you might not necessarily invest but I don't advise anyone not to invest, u can invest but another option is creating a business idea with the money do even if inflation occurs you won't lose money your business also inflate with it.

 

[Bagg victor]

Getting in debt due to bad spending habits such as the uncontrolled use of credit cards can quickly lead you to a downward spiral.

 

[Esther]

In my opinion, money mismanagement is the thing everyone should avoid . It I bad and risky because you will always never have money to do important things because you will use the money for less important things. Get a financial adviser to help you on your spending limit.

 

[Tundeoguns1]

What personal finance mistake should everyone avoid. That's a very interesting question. Well the main thing every should avoid when taking a risk in investment is to always avoid investing all your capital or funds. I think everyone could the way if taking risk then there will be no financial mistake.

 

[Victakin83]

For me it will be not Investing Appropriately - If you simply keep your cash in reserve/savings bank account, you are not investing you are doing the opposite. Your saved Money will lose its value and become worthless due to rise in inflation.
It's better you invest your Money into Profitable and low Risk Businesses and keep your money flowing beating inflation and making your money more worthy.

The personal financial mistake everyone should avoid is spending without budgeting. Budgeting for all your financial life activities is very important. It will guide you to know the necessary things needed to spend money on.

 

[Marfav]

To invest in the wrong company to stop wasteful spending. Extravagant loans from commercial banks should also be avoided, unless it is required to develop the business. Another mistake most people make is borrowing money from individuals. And that's what makes one a debtor.

 

[Judee201]

Having a combined personal account and business account
Whether you are alone in the business or in a partnership, it is important for you to separate your personal account or money from the business. This will not only help you know the viability of your hibusiness, you will be aware of how much the business is making. Even if you collect money from your personal account to invest in the business, don’t forget to return it.

 

[adeniji]

Financial mistake should be avoid by not borrowing money for making investment because if the investment have issue, that will lead to double loss because the money been use to invest as been loss and the income been expected as been loss as well.

 

[FreshKaz11]

For me it will be not Investing Appropriately - If you simply keep your cash in reserve/savings bank account, you are not investing you are doing the opposite. Your saved Money will lose its value and become worthless due to rise in inflation.
It's better you invest your Money into Profitable and low Risk Businesses and keep your money flowing beating inflation and making your money more worthy.

My take on this is that all business owner should take all measures to plan well and save before starting up a business, because if you choose not to save and plan ahead of your business,if anything happen at the end of you starting up your business and you need financial backup but since you are not saving you could loose your business at that moment of time..

 

[btaliat]

Avoid spending recklessly is one of the financial advice I will give to a business or an intending business owners. We should learn how to have scale of preference and buy things based on their need and not want. This is my own financial advice

 

[OderuMiracle]

Great fortunes are often lost one dollar at a time. It may not seem like a big deal when you pick up that double-mocha cappuccino, stop for a pack of cigarettes, have dinner out or order that pay-per-view movie, but every little item adds up. Just $25 per week spent on dining out costs you $1,300 per year, which could go toward an extra mortgage payment or a number of extra car payments. If you're enduring financial hardship, avoiding this mistake really matters – after all, if you're only a few dollars away from foreclosure or bankruptcy, every dollar will count more than ever.

2: Never-Ending Payments
Ask yourself if you really need items that keep you paying every month, year after year. Things like cable television, music services or fancy gym memberships can force you to pay unceasingly but leave you owning nothing. When money is tight, or you just want to save more, creating a leaner lifestyle can go a long way to fattening your savings and cushioning yourself from financial hardship.


3: Living on Borrowed Money
Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don't be one of them. Credit card interest rates make the price of the charged items a great deal more expensive. Depending on credit also makes it more likely that you'll spend more than you earn.

4: Buying a New Car
Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car. Furthermore, by borrowing money to buy a car, the consumer pays interest on a depreciating asset, which amplifies the difference between the value of the car and the price paid for it. Worse yet, many people trade in their cars every two or three years and lose money on every trade.


Sometimes a person has no choice but to take out a loan to buy a car, but how much does any consumer really need a large SUV? Such vehicles are expensive to buy, insure and fuel. Unless you tow a boat or trailer or need an SUV to earn a living, is an eight-cylinder engine worth the extra cost of taking out a large loan?

If you need to buy a car and/or borrow money to do so, consider buying one that uses less gas and costs less to insure and maintain. Cars are expensive, and if you're buying more car than you need, you're burning through money that could have been saved or used to pay off debt.

5: Spending Too Much on Your House
When it comes to buying a house, bigger is not necessarily better. Unless you have a large family, choosing a 6,000-square-foot home will only mean more expensive taxes, maintenance, and utilities. Do you really want to put such a significant, long-term dent in your monthly budget?

6: Using Home Equity Like a Piggy Bank
Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity. In addition, you'll end up paying way more for your home than it's worth, which virtually ensures that you won't come out on top when you decide to sell.

7: Living Paycheck to Paycheck
In March 2018, the U.S. household personal savings rate was just 3.1%, according to Federal Reserve data. Many households are living paycheck to paycheck, and an unforeseen problem can easily become a disaster if you are not prepared. The cumulative result of overspending puts people into a precarious position – one in which they need every dime they earn and one missed paycheck would be disastrous. This is not the position you want to find yourself in when an economic recession hits. If this happens, you'll have very few options.

Many financial planners will tell you to keep three months' worth of expenses in an account where you can access it quickly. Loss of employment or changes in the economy could drain your savings and place you in a cycle of debt paying for debt. A three-month buffer could be the difference between keeping or losing your house.

8: Not Investing
If you do not get your money working for you in the markets or through other income-producing investments, you cannot stop working - ever. Making monthly contributions to designated retirement accounts is essential for a comfortable retirement. Take advantage of tax-deferred retirement accounts and/or your employer-sponsored plan. Understand the time your investments will have to grow and how much risk you can tolerate. Consult a qualified financial advisor to match this with your goals if possible.


9: Paying Off Debt With Savings
You may be thinking that if your debt is costing 19% and your retirement account is making 7%, swapping the retirement for the debt means you will be pocketing the difference. But it's not that simple. In addition to losing the power of compounding, it's very hard to pay back those retirement funds, and you could be hit with hefty fees. With the right mindset, borrowing from your retirement account can be a viable option, but even the most disciplined planners have a tough time placing money aside to rebuild these accounts. When the debt gets paid off, the urgency to pay it back usually goes away. It will be very tempting to continue spending at the same pace, which means you could go back into debt again. If you are going to pay off debt with savings, you have to live like you still have a debt to pay - to your retirement fund.

10: Not Having a Plan
Your financial future depends on what is going on right now. People spend countless hours watching TV or scrolling through their social media feeds, but setting aside two hours a week for their finances is out of the question. You need to know where you are going. Make spending some time planning your finances a priority.

The Bottom Line
To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn't the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority, along with spending time developing a sound financial plan.

Compete Risk Free with $100,000 in Virtual Cash
Put your trading skills to the test with our FREE Stock Simulator. Compete with thousands of Investopedia traders and trade your way to the top! Submit trades in a virtual environment before you start risking your own money. Practice trading strategies so that when you're ready to enter the real market, you've had the practice you need.

 

[Natedini]

1. Frivolous Spending.
2. Letting Your Spouse or Partner Monopolize Household Finances.
3. Not Saving Enough for Retirement.
4. Abusing Credit Cards.
5. Not Having an Emergency Fund.
6. Overspending on a New Home.
7. Not Stashing Enough Cash for Children's College Cost.

 

[Aniwhyte]

@poster you're absolutely right about this, as this is the exact same mistake I made all this past few years, I left my money on my account and didn't used it to invest on anything and today I have spent a lot out of it that it has totally went down the drain.

 

[Sariana23]

Indeed, the worst mistake you can make in finance is investing inappropriately. Another mistake that should not be made is to mix personal expenses with commercial ones, many people take money from the company to make expenses of the house that should be avoided while the company is starting, otherwise the necessary funds of the company may be lost.