Money is complex.
Where there’s complexity, there’s often confusion.
How do you win with money and control it – so it doesn’t control YOU?
Your dedication to getting your finances in check is going to reap the most rewards for you.
In order to start #winning with money, you’re going to need to know what not to do!
Today, I’m breaking down some common mistakes so that you can avoid them in your daily life.
As an added bonus, I’m giving you some winning strategies to help you take control of your money.
Shall we begin?
Top 7 Money Mistakes To Avoid: Start Winning With Money
Money Mistake #1: Not analyzing your finances regularly.
What is your:
→ Monthly take-home pay?
→ Expenses breakdown?
→ Excess monthly income over expenses?
→ Credit score?
You may know your take-home pay right off the bat.
For all the other figures, do you at least know the ballpark numbers?
If you don’t know the breakdown of your finances, how are you going to win with money?
Here are some things to look for…
→ Irregular transaction amounts. [What’s this charge? Dispute!]
→ Restaurant totals including tips match your receipts (or memory).
→ Credit score changes. [750 vs. 745 = normal change ↔ 750 vs. 700 = not normal change]
→ Monthly utilities are consistent with previous months. [Is there a leak?!]
→ The amount you are paying via credit/debit is correct. [Receipts $800 vs. Statement $785.99 = Problem!]
Make it a priority to keep your eyes on fluctuations, irregularities, and problems before it becomes a bigger issue!
Yes, I made a 20-page walk-through guide to get you started!
Don’t be intimidated by the term ” budget “.
Budgets keep you ” in-the-know ” with your finances.
It’s up to you how stringent you are when it comes to implementing one.
Throughout the years, my household expenses have been consistent, so it’s mainly to keep myself on track.
Interesting talk about using a budget: Take Control Of Your Money
Get to know your credit score: Boost Your Credit Score With This Guide
Other tools that are helpful for tracking your money: Tools To Manage Your Financial Health
Money Mistake #2: Not respecting the small amounts.
I’m looking at the ” small amounts ” in more ways than one here.
Let’s start with something you may be most familiar with.
Have you ever looked at a grocery store receipt and asked yourself ” How on Earth did the total get SO HIGH!! “?
Maybe a few choice words here and there.
The receipt looks innocent enough.
People have a natural tendency to see small prices as insignificant.
This is amplified when that item is thrown in a basket with many others.
That’s why I suggest a shopping list for all shopping encounters – either that or a full tummy and strong will.
We won’t be talking about Target – today.
Shopping is only ONE area that can lead to overspending.
Not respecting the small amounts can also affect your finances in other areas of your life.
Here are a few examples.
→ Checking and savings account fees…$5.00
→ Late fees…$15.00 [whoops]
→ Misc. membership fees…$12.99
→ Credit card fees…$29.00 [whoops again]
→ Roaming fees…$49.90 [$4.99/min. x 10 min.]
→ Data overages…$10.00 [extra 1 GB]
Individually, each of these line items may not stand out.
Together, they can accumulate and add hundreds of dollars to your expenses, which otherwise can be avoided with more attention and care.
Alternatively, these small amounts can positively influence your finances in other ways: be used to pay down debt, add to savings, and invested to build wealth.
It’s time for an expenses audit.
Comb through all the extras that you are paying and decide if it stays or goes.
If you find yourself paying “accidental” fees, seek out methods to automate your finances so you’re not stuck paying them unnecessarily.
Looking for a shopping list for your own use? You can get access to a couple different formats by signing up >> Get the shopping list printable in the FTD Library.
Money Mistake #3: Not saving for life’s curveballs.
Let’s say you like to live it up.
You work hard, so you play hard.
What happens when you lose your job, have health concerns, or relationship woes?
This is where saving comes in.
If you save just a little off each paycheck and send it into a savings account, then you’ll have money for what life throws at you.
$50 here, $20 there – it adds up, remember?
Open up a savings account that makes it easy for you to either automate or transfer money.
I recommend AllyBank and Capital360. As of the date of this writing, AllyBank recently raised the interest rate to 1.50% for their online saving accounts.
Plan on saving at least 3-6x your monthly living expenses. Rule of thumb: Single 3x, Married 6x.
If you can’t find extra money, then look around and see what you don’t use anymore that can fetch some money.
Example: I have an old Keurig I can list it on CL and get probably $30-$40 from it and throw that money into savings. Rinse and repeat. As always, be careful selling on CL.
If you have clothing and accessories that have accumulated throughout the years and are in good to new condition, try selling on Poshmark.
Read more on how to make your first sale >> Selling On Poshmark.
Money Mistake #4: Not investing for the future YOU.
As for investing, your 20s and 30s are a great time to start if you want to build long-term wealth.
Let’s say you’re 25 years old now and you want to work until you’re 55.
That’s 30 years of compound growth that will help propel your money and build wealth.
If you plan on investing later in life, also plan on practically doubling your contributions to get to the same goal.
Don’t take my word for it.
Put the numbers into any investment calculator and you’ll see the resulting difference.
You may be thinking, when I get older I’ll figure it out.
I’m sure the folks in their 40s and 50s would say that they wish they had put aside money earlier for investing.
Seek out low-fee investments that have a track record of performing.
I’ve mentioned this in the past, but you can be the most boring investor and still get results. Don’t be intimidated by investment-speak.
You may be investing in your 401k at work. Look at the low-fee options you have available that match your risk tolerance. It will vary depending on your age.
Once you are comfortable with the concept of growing your money, consider other investment options.
The next step I took with ease was opening an IRA (Roth or Traditional). It allows for max contributions of $5,500/year (2018).
Read this article if you want to learn more about investing for the long-run:
- Millionaire Mindset: 5 Sobering Realizations About $1M
- Financial Freedom: Insights For Anyone Looking To Make It Happen
- Retirement Thoughts: Get The Wealth Equation Down
Money Mistake #5: Not making debt payments as they come due + not having a debt payoff goal.
If you have a loan, credit card, or any other form of debt, then you have promised to pay back the money you were given.
When you default by not paying your bills, you are screaming to the world that you are not good for your promises and your word is meaningless.
As a result, you are awarded the status of “ bad credit ”.
When this happens, anytime you borrow money, you will pay higher interest rates and endure other unfavorable terms and conditions.
If you take out loans or credit then commit to not take out more than you can pay comfortably.
More importantly, with most debt, aim to pay off the balances so that you can redirect that money to build wealth.
It’s important to start saving and investing, but if you have consumer debt, student loans, and any other debt (other than the mortgage), it’s smart to take care of those balances.
The micro-focus you put into paying off the debt can then be redirected to other wealth-building buckets.
As an example, if I was paying off debt it would look like this…
1-year debt payoff horizon
→ Contribute to 401k to get the employer match.
→ Add money to savings to get 6x living expenses.
→ Debt, debt, debt payoff (other than mortgage).
Again, this would be my method.
Work out a plan that makes sense for your debt timeline.
As always, don’t default, work on a debt payoff plan, and limit debt build-up.
Money Mistake #6: Using an emotional approach to making financial decisions.
Here are some scenarios.
You live in a suburban house, but you want a condo in the city.
It would only cost 3x more than the current monthly payment.
This may seem like a drastic example, but it illustrates how wants and desires can cloud financial judgment.
How about the upsell at the jewelry store?
He’s about to pop the question, so emotionally he wants to buy a 1 ct. diamond – because that’s what she wants, the bigger the better.
But then, if it was .75 ct., would she really refuse to marry him? (Hmmmmm?)
The point is this. Emotional decisions can make people vulnerable to spending far more than they actually can.
This can apply to anything from an engagement ring to designer shoes to your dream house!
There is nothing wrong with liking what you have, but it needs to make sense and sometimes downgrading just a little can make a huge financial difference!
Envision the top ways you want to spend your hard-earned money in your lifetime.
What is it for you? Is it financial freedom, house on an acreage, living in your favorite city…and so on?
Before making a big emotional purchase, compare and contrast to your end money goals.
If it makes sense, it stays. If it doesn’t, you know what to do.
It will help you come to the right conclusion.
You can’t have it all and expect to pay for it all – unless you can?!
Money Mistake #7: Leaving money on the table.
Let’s say your employer matches your 401k contribution up to 6%.
Many people in the company are likely keeping their contributions at the default rate which may not meet the match.
You should be able to login to your plan provider’s website, go to the contributions section, and make the percentage change.
You’ll barely notice the change in your paycheck and you get ALL THE FREE MONEY.
Another way you may be leaving money on the table is by not negotiating a job offer, not working towards a raise or promotion, or not finding a higher paying job.
There is no step-by-step guide to your next raise that is applicable to every, single person.
Each employer is different. You’re going to have to tread the waters yourself to know what is possible for you.
Remember, when you settle for less money you’re leaving thousands of dollars on the table.
Getting your max contribution is easy and can be done in a few clicks.
Making more money at your job is going to be harder.
In the past, these are the tips that have worked for me:
→ Be proactive
→ Show up – not just physically, but mentally as well
→ Be a problem-solver
→ Make your boss’s job easier
→ Get certified (if it applies)
Also, take a look on Glassdoor.com so you can see what is out there in your city. It doesn’t hurt to look and compare.
I’ve mentioned this before, but even if it’s a lateral move, there may be more opportunities, benefits, or retirement contributions that will make an impact in your overall financial picture.
Related article: Be Awesome And Conquer Your Financial Goals
Let’s review what you can do so you don’t make the mistakes mentioned above!
#1 – Take time to analyze your finances so you know what you have to work with.
#2 – Respect the small amounts because they will matter over the long-run.
#3 – Save for life’s curveballs.
#4 – Invest for the future you.
#5 – Pay all debt as it comes due and make a goal to pay off debt.
#6 – Think rationally about big emotional purchases by looking at the big picture.
#7 – Check all the boxes to increase the amount of money you get.
Start winning with your money and you won’t look back!
Read more about my mission HERE.
*As with all financial and investment decisions, consult a professional. Read disclaimer here.
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Have you made any money mistakes that have caused you trouble in the past? Are there other pitfalls not mentioned in the article that should be discussed?