When we start in working life, no one has ever really taught us how to manage our personal finances.
And for lack of financial education, the choices we make with our money are not necessarily considered.
The problem is that the habits we adopt now will tend to follow us more or less strongly throughout our lives .
That’s why understanding the most common financial mistakes—and how to avoid them—will help you make better financial choices in the future. And not the same opportunity to save money, time and stress.
Discover in this article the 15 most common financial mistakes to avoid at all costs to manage your money well.
1.Ignoring personal finances
Actively managing your money is a bit like going to the gym: you know you should go, but you probably have very good excuses to put it off until tomorrow.
But unlike a gym membership, you can’t terminate your personal finances. And more importantly, you can’t really ignore them unless you want to risk getting into a sticky situation.
The truth is, it’s easy to convince yourself that ignoring your money isn’t so bad: fear of failing, fear of depriving yourself, or just being honest with yourself. himself and his dreams are big obstacles.
But one thing is for sure: turning a blind eye to your finances now is bound to pay the price later . And the sooner you do it, the better off you will be.
Never ignore your bank account for fear of facing the truth. Without knowing where you are (and where you want to go), it will probably be impossible to change the situation.
2.Take consumer credit
Using a credit system to finance your consumer spending is playing with debt. And in the majority of consumer loans, this debt leads to a harmful and dangerous financial situation.
In any case, you should never use credits to buy everyday items such as clothes, food or hobbies. You then accumulate “bad debts”, the consequences of which may well affect you for longer than you think.
On the other hand, a debt is considered “good” when it is used to finance an asset, that is to say something that will bring you money (take out a loan to invest in real estate, invest in their studies…). Limit your credits to the acquisition of “good debts”.
3.Buying a new car without having the means
Many people decide to buy a new car when they really cannot afford it , for example by accepting financing plans or car loans.
The problem is not really in the purchase itself. It is especially that few people realize that by paying for a car beyond their means, they automatically limit their choice and their ability to finance other desires and objectives.
Owning a car is already expensive in itself: between gasoline, insurance, parking… It will consume a good part of your budget each month. Of course, it is sometimes unavoidable when you need a vehicle for your daily journeys.
On the other hand, choosing a new car instead of a used car is often an ill-rational personal choice. The car is too often seen as a symbol of status and success.
And if your dream is to buy one, the goal is of course not to stop you. The problem starts when you don’t realize that financing a new car can impact your other goals .
Keep in mind that the money you put in your car will be money that you cannot use for other purposes (travel, house, start your business…)
At a minimum, you should have an emergency fund to be ready for financial contingencies before you take out credit for your car.
4.Borrow money from friends and family
When you’re in dire financial straits, it’s easy to be tempted to borrow money from friends or family – promising to pay them back, of course!
But by putting money between you and your loved ones, you are bound to put a strain on your relationship .
No matter the quality of our ties to others, we remain human. And our tendency to judge is inevitable. Keep in mind that your loved ones are likely to question your financial decisions and think they can afford to comment on your spending habits.
If you borrow $100 from someone and show up a few days later with brand new shoes, expect some feedback, legitimate or not.
Your loved ones might also need to get the money back faster than expected in case of an emergency on their end as well. Or you may feel guilty every time you see them. There are many possible bad scenarios.
In any case, try never to ask your family or friends for money , except in an extreme situation.
5.Spending without having a monthly budget
If you want to take control of your money, you need to know where it’s going and plan ahead how you plan to spend it. In summary, you need to build your monthly budget .
The idea of budgeting monthly can seem daunting. But it’s actually much simpler than it looks. No need to stabilize your account statements or keep all your credit card receipts.
Today there are many applications or software to do your accounts , as well as simple methods to make your task easier.
This is particularly the case with the 50/20/30 rule , which is flexible enough to adapt to all financial situations. This rule, widely used in the field of personal finance, suggests that you distribute your expenses as follows:
- 50% for essential expenses , which include housing, transport, essential food…
- 20% for financial priorities , which are savings, investment, long-term purchases, retirement…
- 30% for pleasure/leisure purchases , which are gifts, travel, restaurants, shopping and everything in between!
Then track your spending to make sure you’re sticking to your budget. There are many ways to create and track your personal budget : it’s up to everyone to choose the one that suits them best.
Either way, until you have a budget, you are not in control of your money. And it will be impossible to achieve your financial goals without regularly monitoring the results of your efforts.
6.Staying in a job with no prospects for the future or advancement
Another big financial mistake is to stay in a job with no way out or possibility of evolution (whether in position or salary).
It’s easy to forget, but staying too long in a job that doesn’t allow you to grow or develop your skills can really hurt your wallet.
Even if it is often better to have a “springboard” or temporary job rather than no job at all, you should only stay there long enough to find something better. If all doors seem closed at your current position, you should have a plan in mind to find better opportunities.
And while changing jobs can be scary because of a lot of myths about the importance of job stability, changing jobs has actually been shown to be one of the best ways to increase your salary .
7.Not having set financial goals
If you haven’t set clear goals for setting aside money and preparing for your financial future, it’s hard — if not impossible — to move forward. How to achieve your goals when you don’t even know them?
And getting started is actually a lot easier than it looks. At a minimum, figure out where you want to be in a year, and ask yourself how your money can help you get there.
Then you should at least have a budget in place that matches that financial plan. Aligning your budget to your goals is key to helping you ensure your spending aligns with your priorities.
Your financial plan will help you decide when to start investing your money, how much you’ll save for retirement, and reach your other financial goals.
8.Not having an emergency fund
I often talk to you about the importance of having an emergency fund, but in reality, a large part of the American do not have a safety cushion (or with insufficient sums).
Yet, without an emergency fund, you become dependent on your environment and any financial contingencies that may arise.
You make decisions with your bank account issues in mind rather than following your heart. You should now:
- Start building your emergency fund
- Invest in it at least the equivalent of 3 months of expenses
- Set a percentage of your salary that you will put into your emergency fund each month
9.Not daring to ask for a raise
When you work hard to earn money and constantly develop your skills, but your pay stays the same year after year, maybe it’s time to speak up and ask for the raise you deserve. .
In any case, keep in mind that asking for a raise requires preparation. We have also written an article for you where we detail the steps to follow.
10.Make impulse purchases
Not having a clear monthly budget is one of the best ways to overspend and get trapped into impulse buying .
The problem with not tracking your spending carefully is that you tend not to realize how much money you’re wasting each month on purchases that don’t actually contribute to your happiness.
That doesn’t mean you shouldn’t shop for fun, quite the contrary! But you should define each month in advance where and what you are going to spend your money on to avoid the regrets that will prevent you from paying you what really matters to you.
Personally, I have created in my personal budget a ” Garden of Desires “ in which I add the pleasure purchases that I would like to make. This technique allows you to take the time to put enough money aside, but also to think about your purchase before taking out your credit card.
11.Not having the right bank
The world of banks has changed enormously in recent years. And if you never thought of exploring other options beyond your traditional bank account, you may be missing out on offers and opportunities that are much more interesting than your current contract.
Do you know exactly how much you pay in management fees, account maintenance, exceptional transactions? Even if it is certainly not the sexiest subject, you should know and master your contract, but also regularly strive to see if you could find better in the competition.
12.Spend all windfall cash flow
Did you receive an exceptional bonus or bonus at work? A heritage ? Won a small amount of money in the lottery or scratch games?
Too often, the temptation is to spend everything immediately to “benefit” and afford to buy without really counting.
Rather than having your credit card burned, just take a moment to think about the different ways you could use that amount to your advantage.
Of course, you should be able to enjoy it. But do you necessarily have to spend everything on pleasure purchases? How about using some of that money to pay off loans a little earlier and free your mind of financial worries that are draining your mental energy?
Also consider financing part of your emergency fund to ensure your financial peace of mind. What better pleasure than peace of mind? 💆🏼♀️
13.Do not compare prices while shopping
There’s no reason why you shouldn’t look for a better price when you need to buy something, especially when it comes to inexpensive items.
Thanks to the Internet, you have access to thousands of information and solutions to compare prices in minutes or even seconds.
By comparing before you spend, you will find that you could literally save hundreds or thousands of dollars a year without depriving yourself of buying the items you want.
Similarly, to save money at the supermarket , take at least a few seconds to look around and compare the item you have in hand to see if there is a cheaper alternative. On a shopping cart for a week, the difference can really be significant.
Please note : the goal is not to spend dozens of minutes looking for the best reduction coupon to save €0.25 on your package of Fleury Michon ham.
This search can be especially interesting for items costing several tens of euros. Your time is precious: use it wisely!
This is one of the most popular financial tips. Robert Kiyosaki praises it at length in his personal finance bestseller Rich Dad Poor Dad .
When you get paid, it’s important to pay yourself first before paying the rest of your expenses and bills. That is, you should put money aside for your savings/investment/retirement goals first before anything else.
To go back to the example of the 50/30/20 budget that we presented above, you should first allocate your 20% to savings accounts or other investments, then your 50% of compulsory expenses, and keep the 30 % of leisure for the end.
Automating your savings through an automatic transfer from your bank is one of the best solutions to ensure that you follow this advice.
15.Always buy everything new
There are so many ways to buy the items you need without having to pay the maximum price of a new item.
Buying second-hand is too often seen as “cheap” or even downright dirty, but these are often psychological prejudices that are quite easy to overcome.
Buying second-hand items like furniture, cars, appliances, or even clothes can help you save a lot of money in the long run, without really noticing the difference…and while making a gesture for the planet.
And the question is not only whether you can afford to buy it new (the answer will often be yes), but rather whether you really need to buy it new.
Once you get used to it and you realize that you can save sometimes colossal sums without any difference in your daily life, you won’t even want to go back to new.