Financial Errors

10 Vital Financial Errors to Evade for Long-term Success

Having a healthy bank account and money in your wallet feels super amazing! But getting your finances in order is about more than just having spare cash to spend on the weekends or finally buying that gadget you’ve wanted. 

It’s about setting yourself up for success down the road, whether that’s retiring comfortably, being able to afford your dream house, or just having financial security.

The bad news? 

There are a lot of ways you can sabotage your financial future without even realizing it. 

The good news? 

Once you know what these mistakes are, they’re easy enough to avoid. Here are 10 big financial errors that can seriously hurt you in the long run, and what you can do to steer clear of them.

1. Not Making a Budget

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Failing to actually budget how much money you make versus how much money you spend each month is one of the fastest ways to end up struggling financially.

Without a budget to track everything, it’s way too easy to overspend without noticing—those daily Starbucks runs, Ubers around town, and Postmates burrito cravings add up crazy fast. Before you know it, you’re barely able to cover rent or you’ve racked up a crap ton of credit card debt.

Making a budget forces you to take a close look at how much cash is coming into your bank account each month versus how much is flowing out. 

Doing this allows you to catch unnecessary spending immediately and put a stop to it. There are some great budgeting apps out there that connect to your bank account automatically and categorize where all your money is going each month, taking most of the work out of budgeting for you. 

Or you can use a boring old Excel spreadsheet or a handwritten budget to track income and expenditures. However you choose to do it, monitoring exactly how much money you have coming in and what every single dollar you spend is being used for is an absolute must.

Tips to help you budget successfully:

  • Download a budgeting app like Mint, Personal Capital, You Need a Budget (YNAB), or EveryDollar to automate tracking income and spending.
  • Use the 50/30/20 budget rule: 50% on essentials, 30% on wants, and 20% savings.
  • Build budgeting into your weekly routine; check on your budget status for 15–30 minutes each week.

2. Not Making Your Emergency Fund a Priority

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When life hands you an unexpected financial curveball—a medical emergency, major car repairs you can’t put off any longer, or even suddenly losing your job—it can be completely devastating if you don’t have emergency savings set aside to cover these surprise expenses. 

Too many people end up forced to pile up ridiculous amounts of high-interest credit card debt that hang over them for ages, never paying it off.

That’s why setting up an emergency savings fund needs to be priority number one with your money. 

Even having $500–$1000 in a savings account specifically earmarked for unexpected stuff popping up can prevent you from missing important bill payments or needing to get predatory payday loans that have insane interest rates. 

Most experts recommend you save up enough to cover 3-6 months’ worth of normal living expenses in your emergency fund savings account. 

Yeah, that takes some time to build up, but even setting aside a little bit each month will get you there faster than you think. Protecting your future self by having this financial safety net is clutch.

Tips for building your emergency fund quickly:

  • Aim to set aside $500–1000 first before growing your emergency fund. more
  • Contribute any extra money leftover in monthly budgets to the fund.
  • Always pay yourself first; automate contributions from each paycheck.
  • Consider keeping emergency savings in a high-yield account to earn interest.

3. Falling Behind on Payments and Screwing Up Your Credit

Late fees, jacked-up interest rates, utilities getting shut off—falling behind on different payments often starts a nasty snowball effect that can trash your credit score. And once your credit score gets damaged, it can honestly take years to rebuild it. 

A crappy credit history makes everything way more expensive too: higher interest rates on loans and credit cards, bigger security deposits just to rent an apartment, higher insurance premiums, and more.

The straightforward solution? 

  • Make 100% on-time payments an absolute must every single month
  • Zero exceptions are allowed here
  • Sign up for automatic payments so you never miss payment due dates accidentally. 
  • Using reminder alerts on your phone to know when different bills are due can help too. 
  • Establishing an awesome track record of reliably paying all your bills in full and on time, month after month, will keep your credit score high.

Strategies to never miss payments:

  • Utilize autopay features and automatic transfers with bills when possible.
  • Use calendar alerts and track due dates closely each month.
  • Avoid overextending your finances; don’t sign up for payments you can’t afford.
  • Check credit reports regularly and dispute errors quickly.

4. Living Beyond Your Paycheck

Online Shopping
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It’s really tempting to want all the latest iPhone models the day they drop, be able to go out for bottomless Mimosa brunches whenever, get Amazon packages delivered every other day, and take baller vacations a few times a year. 

But consistently spending more money than you actually make is a one-way ticket to winding up in serious money struggles.

Overspending leads people down an ugly path of racking up credit card balances that spiral out of control because of insane 20+% interest rates. 

It also causes people to continually take on new debt just to pay off old debts—credit cards, personal loans, borrowing from family and friends. 

Unchecked debt snowballs fast and leaves people totally stressed about keeping their heads above water financially.

The key here is adjusting your lifestyle spending to be less than whatever your monthly paychecks total. 

Tips for avoiding lifestyle inflation:

  • Focus budgets on needs first: housing, food, and transportation.
  • Set limits for non-essential spending categories.
  • Hold off on upgrades and new purchases whenever possible.
  • Find ways to enjoy experiences over physical items.
  • Give yourself time to adjust to higher incomes.

5. Not Saving for Retirement Early on

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It seriously seems crazy, but a ridiculously high percentage of adults have a big fat $0 saved for retirement—even people about to retire soon! 

Young people specifically often see retirement as something they don’t need to worry about addressing until way later in life. But in reality, time is one of the most valuable things on your side when saving for retirement. 

Even small amounts invested in your early 20s can grow into huge sums for retirement thanks to compound interest working its magic over decades.

Not starting to save and invest money for retirement from the very beginning of your career can totally screw over plans to retire comfortably someday. 

Making retirement savings contributions a priority—even starting with just 1% or 2% of your salary—needs to happen ASAP. 

Increase the amount you contribute whenever raises come through. Take full advantage of “free money” employer matches with workplace 401k plans when offered. 

Setting up automatic contribution increases over time is awesome too, as your income rises. Believe me, your future retired self will be so grateful that you set aside retirement money each month.

Tips to jumpstart retirement savings:

  • Enroll in employer-sponsored 401k/403b plans, especially with match
  • Contribute even small amounts early and increase over time.
  • Fund Roth IRAs for tax-free growth if there is no workplace plan.
  • Let compound growth work its magic over decades.
  • Take advantage of being young by investing aggressively.

6. Not Totally Grasping How Debt Works

In Debt
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Debt isn’t always bad news, especially when used strategically and minimally. Taking out a reasonable student loan to graduate college or a mortgage to buy a house makes good financial sense. 

But way too many people truly don’t comprehend how the debt and loans they have actually work, especially how interest and minimum payments get calculated. They underestimate how much they’ll ultimately pay in interest costs over time.

High-interest debt like most credit cards and payday loans can trap you in a super tough situation if you only make minimum payments month after month. 

The principal loan balance often barely goes down at all since so much of that payment is just covering insane interest fees. What seems like $200 or $300 borrowed can turn into thousands owed over years because compound interest works against you, not for you.

Before taking out new loans or credit cards, make sure you fully understand super important terms like APR, how amortization schedules work, what goes into calculating minimum payments due, etc., so you truly get the total cost of borrowing money. 

Aggressively pay down any existing high-interest balances rather than making minimum payments when possible. Be very cautious with slick but predatory lending companies touting loans that seem awesome at first glance but pile on ridiculous interest fees.

Tips before borrowing money:

  • Clearly identify why debt is needed and if alternatives exist.
  • Recognize the true total cost by identifying full terms like APR.
  • Don’t take on more debt than you can reasonably manage.
  • Focus on debt payoff savings goals and strategy

7. Going “All In” on Single Investments

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Investing provides an invaluable opportunity to grow wealth for major life goals if done responsibly over many years. But it certainly carries risks as well. 

New investors, especially, can feel tempted to put a ton of cash into one lone company’s stock or cryptocurrency; they’re positive it’s on the fast track to double, triple, or 10x their money. 

But staking everything on one company doing well long-term is seriously risky business; stock and coin prices bounce all over the place. They can suddenly tank for seemingly no reason at all, leaving investors financially devastated.

True investing success requires diversification—spreading money across a strategic mix of stocks, bonds, real estate holdings, crypto, etc.

Investing 101 tips:

  • Never invest money you may need in the short term.
  • Dollar cost averages into positions over time.
  • Diversify across asset classes and within them.
  • Understand your risk tolerance.
  • Rebalance portfolio allocation every 1-2 years.

8. Being Underinsured

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Very few people enjoy cutting insurance companies big checks for premiums every month. But having adequate insurance (with enough coverage limits) is absolutely critical for protecting finances against sudden disasters that would otherwise drain savings accounts dry. Trying to save some money by skimping on insurance can ultimately backfire in a huge, financially devastating way. You have to protect yourself.

Taking a thorough inventory of potential insurance needs—health, disability, life, auto, homeowners/renters, umbrella liability, and more—allows you to optimize having enough protections in place tailored to your unique situation. 

Shopping for insurance rates annually helps spot ways to improve coverage with premium costs as well. Making sure to pay insurance bills on time every month ensures policies never lapse accidentally. Yeah, insurance isn’t fun or exciting, but it brings invaluable peace of mind.

Tips for optimizing insurance:

  • Review insurance needs annually for changes.
  • Shop rates and compare policies when renewing
  • Increase coverage amounts as income and assets grow.
  • Never let policies lapse by missing payments.
  • Add umbrella liability insurance once assets increase.

9. Not making the IRS work for you

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No one loves the IRS and dealing with taxes, but owing back taxes or failing to claim deductions and tax credits costs Americans insane amounts of money every year. 

Letting tax savings opportunities fly over your head often means leaving free money on the table that could be used elsewhere in your financial life. Beyond sticking to tax rules and deadlines, thinking more strategically with taxes includes moves like:

  • Putting some investments in Roth retirement accounts that grow tax-free forever instead of tax-deferred accounts that get taxed down the road
  • Adjusting W-4 withholdings at work to maximize take-home pay while avoiding big annual tax bills
  • Making absolutely sure you claim every possible tax deduction and credit you qualify for to reduce taxable income
  • Being purposeful about what investments and asset accounts make the most tax sense based on timelines and goals
  • Carefully considering timing decisions around when to take profits or losses on investments and assets with taxes in mind

While dealing with taxes might not ever be on your list of favorite things, missing out on ways to reduce tax bills and maximize savings can significantly impact your immediate finances and long-term money growth opportunities. 

Getting educated on tax strategies and planning available for your situation is so valuable.

Tips to take advantage of tax planning:

  • Contribute to tax-advantaged retirement accounts.
  • Review W 4 withholdings so they cover expected taxes.
  • Don’t realize taxable investment gains unnecessarily.
  • Write off every allowable deduction during tax season.
  • Get expert guidance from CPAs or tax strategists.

10. Trying to DIY Everything on Your Own

It makes total sense to feel like you can and should take charge of your finances alone. Money topics definitely fall into the “adulting” category. 

Every young person looks forward to finally taking over themselves someday.

 And yes, building competence with essential money skills like budgeting, saving up some cash in the bank, building an emergency fund, and working and earning an income are absolutely things every person should fully own.

But the reality is that personal finance as a whole is massively broad, covering tons of complex topics: investing appropriately, money and debt management, understanding loans, buying insurance strategically, estate planning, optimizing taxes, etc. 

Very few people truly have the advanced knowledge and enough free time to effectively handle all facets of their financial life 100% solo from a young age, all while simultaneously developing a career path, building relationships, taking care of their health, perhaps raising kids someday, and everything else life brings.

The Takeaway

Over Spending
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Money problems and big financial mistakes often stick around for ages, carrying harsh, long-lasting consequences. But once you know what common money blunders people typically make, they’re pretty straightforward to sidestep yourself. Skipping out on these 10 vital errors I covered helps set you up for financial security now and major payoffs further down the road.

Remember, it’s truly never too late to start making better money decisions, even if you’re already deep in debt or have made some of these mistakes already. 

Stay focused on building awesome financial habits moving ahead vs. dwelling on the past: budget diligently, grow savings accounts, make payments on time always, keep lifestyle spending reasonable compared to paychecks, think about retirement goals early on, use lending stuff wisely, mix up investing dollars, lock down solid insurance coverage tailored to your needs, explore ways to keep more money through strategic taxes, and don’t be shy about asking for help from financial pros!