People Who Are Good With Money Avoid These Missteps
While there are hundreds of potential mistakes people might make with money, there are some financial moves that can really set you back. Between bad habits and wishful thinking, poor financial choices can happen all the time.
This round-up can serve as your guide for what not to do when it comes to personal finance. From not saving for retirement to living beyond your means, here are some things that people who are financially stable don’t do.
Lose Track of Money
Money isn’t infinite. That’s why it’s important to keep track of where you’re spending it. If you don’t know where your money is going, it’s easier to waste it. Let’s say you’re paying for subscription services you don’t use. Before long, you’ve spent $1,000 on music streaming, and you had no idea. That $1,000 you didn’t use could’ve paid down a credit card.
Buy Houses They Can’t Afford
Being house poor isn’t a good look. This term refers to someone who uses most of their income on a housing payment. If you pay more for a house than you can actually afford, you’re putting yourself at risk financially.
Overspend on Credit Cards
Overspending on credit cards is one of the biggest financial mistakes someone can make. If you have too high of a credit card balance, you may be heading down a slippery slope. If you can’t make your payments, then you’ll also be subject to expensive late fees and interest charges.
Invest Money They Can’t Lose
Investing takes a little planning and saving to do properly. Someone who does well with money has usually planned their investments to some degree. If you’re not great with money, you may invest cash you can’t afford to lose. Make sure you’re in a good place to invest.
Live Beyond Their Means
Financially secure people are sure of where they stand financially. If you don’t have the money to go out every night, put down your credit card and stop heading to restaurants and bars. Make a budget and stick to it.
Buy Quantity Over Quality
Someone who’s good with their money knows that, sometimes, a quality item is worth the extra cost. If you’re buying too many cheap little items, you may end up spending more over the long run. A lot of inexpensive clothes or household items may seem like they don’t cost much, but they can quickly add up.
Eat Out All the Time
Eating out is expensive. Not only do you have to pay a premium for convenience, but you’re also throwing money out the drive-thru window. People who are financially stable are usually very careful with their dining-out dollars. When you do eat out, make it count and go with family or friends.
Overspend on Weddings
Weddings can sometimes cost outrageous amounts of money. It’s easy to fall into the trap of overspending on a wedding dress, cake and all the little details that you won’t ever use again after your wedding.
Shop When Emotional
Retail therapy is sort of a common trope. While shopping may seem therapeutic at times, more often than not, positive feelings you get from shopping or retail therapy are temporary. After a long shopping bender, you may even end up feeling worse than you did before.
We’ve all had someone bring back a cute souvenir or trinket from a vacation. While the thought is sweet, many times these items end up in a drawer, never to be used. People who are smart with their money don’t waste it on little trinkets that no one really needs.
People who are good with their money know that time is also a form of currency. When we waste time doing unproductive or unfulfilling things, we’re taking away from something else that can bring us more joy.
Skip Retirement Savings
The financially stable people among us don’t skimp on saving for retirement. Your prime working years are the years that matter the most when it comes to retirement savings. Anyone who has built up a nice nest egg started somewhere. Every little bit counts, and no amount is too small.
Neglect Making Saving a Priority
When it comes to money, financially responsible people know that saving is one of the most important things you can do. The wise understand that saving is a fundamental part of being financially stable.
Fall for Finance Deals
Financing and sales gimmicks are geared towards enticing you. If you can’t afford what you’re financing, don’t fall for the marketing traps. Financing deals may offer you no interest for a year, for example. After that year, you may end up paying stiff interest fees. You'll all of a sudden get hit with much bigger payments.
Co-sign If They Can’t Pay
Out of the goodness of your heart, you may feel obligated to help someone out by co-signing for them on a loan. If you can’t afford to pay back the loan if they fail to pay, you may be making a costly financial mistake. Make sure you have a tough conversation with your co-borrower before agreeing to anything.
Rely on Cash When Traveling
When it comes to traveling, cash can be really handy. It’s easier to split the bill with friends or make small purchases when you have cash. But financially responsible people know that carrying only cash with you when you travel is risky. If you lose your wallet or your purse gets stolen, you’ve lost all of your money.
Give Money Over the Phone
Scammers and solicitors are real threats. While you may think it could never happen to you, you should never give money over the phone to someone you don’t know. If the person calling you says they’re from a charity you want to support, then politely decline and go online to donate safely.
Buy Poor-quality Shoes
While there may be some rarely worn shoes in your closet, your durable, everyday shoes are ones that need to stand the test of time. The money-wise even treat shoes as an investment. Cheap shoes tear and break, and they’re uncomfortable. You’ll end up spending more money needing to replace them all the time.
Buy New Cars
New cars are one of the worst investments out there — they’re not really "investments" at all. Not only does it take decades for some cars to appreciate in value, but new cars also actually depreciate the second you drive them off the lot. If you’re someone who’s good with money, you’re likely driving a car that’s at least a couple of years old.
Hire an Advisor They Don’t Trust
Your money is precious. You never want to put money in the hands of someone you don’t know or trust. A financial advisor can be a real partner and confidant when you find the right one. Take this relationship seriously and trust your gut.
Have Only Liquid Investments
A liquid investment is one that you can easily convert to cash. A money market fund, publicly owned company shares and stocks are all examples of liquid assets. When you convert these assets to cash, you typically won’t see a big impact on their value.
Overbuy Company Stock
Buying company stock can be a great way to diversify your portfolio and build wealth. The problem with overbuying company stock is that you might put too many eggs in one basket. If your company goes through a tough time, you might lose a lot of your investment.
Buy Useless Gifts
Being generous is a great thing. Being generous, however, doesn’t always have to mean spending a ton on gifts or freely giving away money. Most people don’t actually need more stuff. Stop trying to buy gifts people really don’t want. Instead, give them something more meaningful that may not even cost anything.
Spending money is easy to do. You can spend money on your phone, from your couch or while watching television. Smartphones, apps and the internet have made spending money far too easy. But when you’re financially stable, you’re also less likely to be impulsive.
Lease the Latest Cars
It's easy to get swept up into keeping up with appearances. Having the latest car can seem like a necessity. But when it comes to leasing a car, you may actually be spending more money. Leasing a new car every year can cost you a lot of money in the long run.
Share Financial Details on Social Media
While your followers on social media may love to see photos of your dog at the beach, they don’t need to see how much you spent on a purse. Keep your finances, spending and personal financial information off of social media. You never know who’s looking at your account or sharing your information.
Sign Contracts Without Reading Them
One of the biggest financial rules of thumb is to never sign anything before reading it fully. With any financial or legal paperwork, you should always read it, double-check it and read the fine print before committing to or signing anything.
Buy a Home Without Understanding the Costs
Buying a home is an important and exciting time in anyone’s life. When you’re ready to take the plunge, be sure you know the full financial picture. Keep in mind that you’re not only paying for the mortgage, but you’re also paying for fees, taxes, insurance and utility bills.
Loan Money When They Can’t Afford To
Loaning money to a friend or family member may seem like a good idea, but it’s often a slippery slope. Even the most trusted friend can fall on hard times and may become unable to pay you back. If a friend or family member comes to you needing money, proceed with caution.
Overspend on Lotto Tickets
Lotto tickets are a fun little trap designed to get you to spend money with the promise of a big payout. We all know how small the odds are of actually winning a lottery, but it doesn’t make it any less enticing to play.