Experts agree: These are the 5 worst money mistakes you may be making (2024)

Money mistakes happen all the time — and you're not alone if you have a few financial regrets of your own.

In fact, a 2019 study by found that an estimated 126.5 million American adults admit to having made a money mistake at least once in their lifetime.

While money mistakes are arguably subjective — you might regret having so much student loan debt, but that degree was necessary to launch your career — there are, however, a handful of missteps that experts agree you can easily avoid.

Here are five common money mistakes and steps you can take to avoid them.

1. Not having an emergency fund

If 2020 taught us anything about our finances, it's the importance of having an emergency fund to tap into when unexpected events arise such as a job loss or unplanned medical bills.

When you don't have any extra cash set aside, you're forced to use expensive ways to finance your life. This can include racking up high-interest credit card debt, taking out a cash advance or relying on payday loans. Accessing many of these financing options will also be tied to what kind of credit score you have, saysLeslie Tayne, a debt-relief attorney atTayne Law Group. Your credit score helps lenders decide how much credit to give you and what interest rate to charge you. If you have a low score, you might not get the best rates.

If you're just beginning to build up an emergency fund, Tayne suggests starting off small.

"Even saving a small amount, such as $25 a week, will yield $1,300 at the end of the year," she says. Other financial advisors recommend using any financial windfalls, such as a stimulus check and/or tax refund, to kick-start your emergency fund if you have your basic needs covered.

"Even a $1,000 cushion can take considerable stress off of your shoulders," says Danielle Harrison, a Missouri-based CFP at Harrison Financial Planning.

Not all financial advisors agree on what to do if you're juggling high-interest debt and trying to save for an emergency fund. Some experts argue that building an emergency fund before paying off your credit card debt is bad advice, while others recommend prioritizing your emergency savings before fast-tracking your debt pay off.

"Many people loathe consumer debt and are motivated by being completely debt-free," says Wilson Muscadin, financial coach and founder of The Money Speakeasy. "While that is a fantastic and worthwhile goal, it shouldn't be at the expense of being prepared for an emergency. They are essentially betting that they won't have a financial emergency in the period of time it takes to pay off that debt."

Open a high-yield savings account to start your emergency fund

High-yield savings accounts earn you more interest than a traditional savings and the best ones have no fees or balance minimums. The Marcus by Goldman Sachs High Yield Online Savings, for example, made Select's ranking as one of the best because it offers no fees whatsoever and easy mobile access.

2. Paying off the wrong debt first

If you have student loans and a car payment and credit card debt and a mortgage, it can be hard to know what to tackle first. But financial advisors caution that you should be careful which balance you prioritize paying off.

"I find that many individuals pay extra toward their mortgage with a rate of 3% instead of attacking their student or car loans that often have much higher interest rates," says Kelly Welch, a Pennsylvania-based CFP at Girard, a Univest Wealth division.

When working on you debt payoff plan, start by writing down all your balances and the corresponding interest rates. Welch recommends tackling your highest interest rate debt first, like credit cards, then moving onto lower rate debt, like mortgages.

"I encourage my clients to treat [credit card] debt with a sense of urgency, at times even pausing retirement contributions until they can get their balances under control," Brenton Harrison, a Tennessee-based financial advisor at Henderson Financial Group, tells Select. "Paying them off not only improves your credit score, but also frees up room in your budget to contribute more toward savings and investments."

Paying off your high-interest debt also helps you save in more ways than one, argues Tayne. "It's impossible to save money when you're paying more in interest fees on debt than you are saving each month," she says.

Consider a balance transfer to accelerate your credit card debt payoff

Balance transfer credit cards offer introductory zero interest periods so that you have more time to pay off your credit card balances while avoiding accruing any additional interest. The U.S. Bank Visa® Platinum Card comes with 18 billing cycles of no interest on balance transfers and purchases (after, 18.74% - 29.74% variable APR; balances must be transferred within 60 days from account opening), plus no annual fee.

3. Missing out on employer matching contributions

According to advisors at eMoney, this is a common money mistake they see younger people making.

If your employer offers a 401(k) match program, you should make sure you contribute at least up to that point so you can take advantage of the full benefit. Employer-sponsored retirement savings accounts also offer tax advantages to help you fund your retirement by having you make pre-tax contributions from each paycheck.

"By not contributing, you're essentially leaving that free money on the table," Welch says. "Any little contribution helps and the earlier you get started in life, the better off you'll be."

You should also consider making a bigger contribution if you can. Oftentimes, people may think that they're putting in the max for their 401(k) plan once they reach 100% of their company's match, says Scott Schwalich and Shon Anderson, Ohio-based CFPs at Anderson Financial Strategies. "But the true maximum contribution for any individual is $19,500 per year, and an extra $6,500 per year in catch-up contributions for those aged 50 and over," Anderson tells Select.

4. Not having credit monitoring or an alert service set up

"It's as easy today as it's ever been for someone to fraudulently charge something on your accounts, open an account in your name or steal your identity," Schwalich says.

While freezing your credit can protect you, the simplest way to catch any fraudulent activity in your name is to sign up for a credit monitoring service that does the work for you and immediately alerts you of any potential danger.

There are a bunch of free credit monitoring resources out there, Schwalich says, so this one is a no-brainer.

Select ranked the top credit monitoring services and top identity theft protection services. CreditWise® from Capital One ranked as the best overall free service for credit monitoring because it offers dark web scanning and social security number tracking, plus a credit score simulator tool. IdentityForce® ranked as the best overall identity theft services for offering the most extensive security features that monitor your information on the dark web, court records and social media.

5. Allowing 'lifestyle creep' to occur

When your income increases, it's not surprising to you find yourself splurging more often than you used to, aka "lifestyle creep."

Rather than buying expensive new things when you can afford them, take that extra money and prioritize your short- and long-term financial goals first. "If you've never experienced the money it is much easier to not know what you are missing," Harrison says.

Joe Lum, a California-based CFP and wealth advisor at Intersect Capital, has another name for it: "lifestyle drift."

"We've all heard the logic before — 'I make more money now, so I can afford it. I worked hard for this salary increase, I deserve it,'" Lum says. "While celebrating milestones can create a positive feedback loop to help you reach your long-term goals, this thinking can lead someone to overspending their newfound windfall."

Make sure you have a plan for any increases in salary or bonuses, such as paying down debt or increasing your savings. "Then any extra can be used to improve your standard of living," Harrison adds.

"Most importantly, having a plan gives you a reason to say 'no' so that you may say 'yes' to something in the future," Lum says.

If it helps you avoid 'lifestyle creep,' Harrison also suggests getting off social media where people tend to constantly compare themselves to others.

"When we bombard ourselves with images of others' 'best' lives, it is hard to not yearn for more," Harrison says. Know that spending more on consumer products won't make you happier in the long run. Instead, focus on social connections, experiences and giving back when you can.

Information about Marcus by Goldman Sachs High Yield Online Savings has been collected independently by Select and has not been reviewed or provided by the banks prior to publication. Goldman Sachs Bank USA is a Member FDIC.

To learn more about IdentityForce®, visit theirwebsite.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

Experts agree: These are the 5 worst money mistakes you may be making (2024)


Experts agree: These are the 5 worst money mistakes you may be making? ›

Buying things they can't afford. Going into debt. Someone who illegally loans money and charges extremely high interest rates. granting of a loan and the creation of debt.

What is the biggest financial mistake people make? ›

Overspending on housing leads to higher taxes and maintenance, straining monthly budgets.
  • Living on Borrowed Money. ...
  • Buying a New Car. ...
  • Spending Too Much on Your House. ...
  • Using Home Equity Like a Piggy Bank. ...
  • Living Paycheck to Paycheck. ...
  • Not Investing in Retirement. ...
  • Paying Off Debt With Savings. ...
  • Not Having a Plan.

What are the common mistakes that people make in handling their finances? ›

Some Common Mistakes in Money Management
  • Not Knowing Where the Money Goes. ...
  • Failure to Set Priorities and Goals. ...
  • The Tendency to be too Trusting. ...
  • Lending Money to Relatives and Friends. ...
  • Waiting too Long to Plan For Retirement. ...
  • Paying Interest Rather Than Earning It. ...
  • Instant Gratification and “Keeping up With the Joneses”

What financial mistakes should one refrain from? ›

Top 9 Common Financial Mistakes You Should Avoid
  • Ignoring the Fundamentals of Budgeting.
  • Getting Debt with High-Interest Rates.
  • Ignoring Savings for Emergencies.
  • Ignoring Extended-Term Planning.
  • Living Over Your Means.
  • Ignoring Insurance Protection.
  • Hasty Investing Choices.
  • Ignoring Financial Literacy.

What are some of the mistakes Americans often make when it comes to money? ›

Buying things they can't afford. Going into debt. Someone who illegally loans money and charges extremely high interest rates. granting of a loan and the creation of debt.

What is the nastiest hardest problem in finance? ›

Bill Sharpe famously said that decumulation is the “nastiest, hardest problem in finance”, and he is right. What's less well-known is Bill Sharpe's proposed solution to this problem, which he called the “lock-box approach”.

What is your biggest financial regret? ›

Here's what they said they'd take back and how you can avoid making the same (potentially costly) mistakes.
  • Regret #1: Living in the moment & not saving enough for the future.
  • Regret #2: Overspending & not living within your means.
  • Regret #3: Taking on too much debt to reach your financial goals.
Feb 27, 2024

What is the biggest reason someone gets into financial trouble? ›

Common reasons that people file for bankruptcy include loss of income, high medical expenses, an unaffordable mortgage, spending beyond their means, or lending money to loved ones. Often, bankruptcy is a result of several of these factors combined.

Why do most people struggle financially? ›

The high cost of living, wealth inequality and job market uncertainty have all contributed to financial vulnerability, even among wealthy families.

Which mistakes should you avoid? ›

If you stop doing them now, you can improve your happiness, success, health, relationships, and more—with plenty of time to spare.
  • Not Saying “No” ...
  • Seeking Approval. ...
  • Being a Victim. ...
  • Too Many Mindless Distractions. ...
  • Not Being Selective Of Your Friends. ...
  • Listening to Everyone's Opinions. ...
  • Not Being Decisive.
Jan 10, 2022

How do you bounce back from financial mistakes? ›

How to bounce back from financial mistakes
  1. Acknowledge the decision and move on. ...
  2. Know (the full extent of) the damage. ...
  3. Change your mindset to change your situation. ...
  4. Find out what your options are. ...
  5. Take action and stay committed.

How do I let go of past financial mistakes? ›

Here are 5 steps to help you move forward after a financial mistake and love yourself again:
  1. Step 1: Acknowledge the mistake. In order to move on, you need to accept and acknowledge whatever financial mistake you have made. ...
  2. Step 2: Talk about it. ...
  3. Step 3: Focus on the present. ...
  4. Step 4: Don't stop learning. ...
  5. Step 5: Let go.

Why do most Americans not save money? ›

For many people, the balancing act between income and expenses leaves little wiggle room for savings. The majority of Americans — 60% according to a LendingClub report — live paycheck to paycheck, with no additional funds left over after they cover expenses each month. This leaves few options for saving money.

Are Americans in trouble financially? ›

Most Americans Are Still Struggling Post COVID-19

Contrarily, the wealthiest 20% of households still maintain cash savings at approximately 8% above pre-pandemic levels. Ultimately, with inflation taken into account, the majority of Americans are worse off financially compared with before the start of the pandemic.

Why Americans are so stressed about money? ›

Why is financial stress so common? Finances play a significant role in our daily lives, from being able to afford food and housing to achieving our future goals. Financial stress can come from a number of related factors, including paying bills, managing debt and having enough savings.

Why do people fail financially? ›

Overspending and lack of budgeting: Living beyond your means and failing to create a budget can quickly lead to financial instability. Without a clear understanding of income and expenses, it becomes difficult to allocate funds appropriately and make progress towards financial goals.

What are the top financial regrets of Americans over 50? ›

Most commonly, Americans regret not saving for retirement early enough (21 percent), taking on too much credit card debt (15 percent) or not saving enough for emergency expenses (14 percent).

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