I’ve done plenty of dumb things in my life, especially when it comes to finances. I’m am impulsive shopper and I’ve had some questionable judgement in the past (just look at my overflowing closet of stuff I hardly wear). But I’m a firm believer that mistakes are a good thing. You learn from them and hopefully, you don’t make the same mistakes twice.
I’m sure we can all admit to at least one dumb personal finance mistake. It’s OK, we’re human. But one day, you’ll look back, laugh, and say “wow I was so dumb back then…but not anymore!”. But for now, let’s take a look at some of the dumbest personal finance mistakes we all too easily make.
Living paycheck to paycheck
Getting paid is definitely a good feeling. But watching your bank account dwindle down to 0 is not. Too many people live paycheck to paycheck and surprisingly, many of those people don’t care. There will always be the next paycheck, right? Wrong. While it may be fun to spend now, there’s going to be a point in time when you need to dip into savings. You need to start putting away some of your income now to prepare for the future.
Charging everything on your credit card
Credit cards can be great. One of the biggest perks of signing up for a card is the rewards program, especially if you like to travel. But on the flip side, making all your purchases with credit is dangerous. It’s a nice bonus to charge everything on your card to get your reward points but the big question is: can you pay off your balance at the end of the month? Interest rates can be ridiculously high and once you become too reliant on credit, it’s a tough hole to get yourself out of.
Investing all in one place
If you’ve already started investing, you’re one step ahead. Make your money work for you. But it can also be very risky if you invest everything all in one place. Take this simple example: what if you invest all your money into one stock and all of a sudden, it tanks? You’re left with nothing. Remember to always diversify your portfolio!
Not having an emergency fund
You never know what can happen. That’s why you need an emergency fund. Even if you’re the most detailed oriented and organized person in the world, you can’t predict everything. When an emergency happens, it can really have a huge impact on your finances and in turn, the rest of your life. Be prepared for it.
Excessive & impulsive spending
Something I think everyone is guilty of is excessive or impulsive spending (at least once in your life!). Every now and then, it’s OK to splurge on something you want. In fact, you should. It’s your money and you should treat yourself. But it shouldn’t be a everyday occurrence. Be wise with your money. Spend on necessities and save the rest. Reward yourself from time to time but be mindful of where your money is going. At the end of the day, think about the long term.
What are some of the biggest financial mistakes you’ve made?