It’s easy to look back and pinpoint what we could have done better in the past. It’s harder to apply that wisdom to the future. But reflection and realizing where you’ve messed up before can be incredibly helpful in making better choices going forward. Here are some mistakes I’ve made when learning how to manage money. Hopefully you can avoid them yourself!
6 Mistakes To Avoid When It Comes To How To Manage Money
Saving only what’s left
My first and most long standing mistake is one that I sometimes still make. It can feel hard to set aside your savings FIRST and then pay your bills out of what’s remaining. However, this common mistake is one of the best ones to fix. When you are able to pay yourself first, so many other financial mistakes can be avoided.
Even if you can only save a few dollars every month, it’s worth it to make it a habit. You can always add MORE money at the end of the month if you have it. But once you’ve spent it it’s gone. Put a little aside for you before anyone else.
Gettting a credit card “for emergencies”
My second mistake in learning how to manage money came early. I had just turned 18 when I received my first credit card offer. I knew debt was a bad idea, but it came with a free ring if I opened the card. I figured I needed a credit card “for emergencies” and to build my credit. Plus free stuff sounded cool.
I had no emergency cash on hand. I had no idea what the terms of the card were. I had no business opening that card! Thankfully I was able to avoid using it TOO much, and it didn’t leave any long lasting negative effects.
Since that time I’ve realized that if you can’t afford to handle an emergency with cash, you REALLY can’t afford to pay interest on that! Bulk up your savings account, getting creative, and a healthy dose of doing without can usually handle most true emergencies without a credit card.
Buying a car I couldn’t afford
It’s a bit sad how quickly we can go from debt free and naive to a stack of dollars owed. Once again at 18, I signed up for financial debt I didn’t really understand when I bought my first car.
There is no reason why I couldn’t have taken the bus to college and work through my young adulthood. But I thought I “needed” a car, and signed myself up for a financial commitment I really couldn’t afford.
Thankfully this mistake in learning how to manage money ended well. My husband and I drove that car for over ten years, and through 4 kids before it finally was no longer repairable. It had been paid off years before.
Now we only pay cash for cars, and it’s well worth it.
Too much in student loans
Taking out too many student loans was actually one thing I did manage to avoid. I certainly could have done better, but I managed to pay mine off (eventually). Unfortunately, my husband has a different situation.
He went to an expensive private college, and took longer than planned to graduate. Even with a good scholarship and grants his student loan debt is a serious financial burden.
When you are learning to manage money, don’t assume you’ll make more in the future. Use the money you have NOW to get through school, even if it might take you a little longer.
If you must take out loans, work as much as possible, and shop around schools. Simply picking a more affordable school can have a long term effect on your future finances.
Buying a house before I was ready
You may be noticing a common theme to the mistakes I’ve made when learning how to manage money. And that’s because virtually they’re all the same mistake, buying something before I could actually afford it.
And our first home purchase was no different. When the housing market crashed in 2008 I was desperate to take advantage of amazing house prices. We bought a small home that had been foreclosed on and needed quite a bit of work.
Unfortunately, we really couldn’t afford it. We didn’t have the full down payment. We paid mortgage insurance for years. And ultimately, it was only through a great deal of financial help from family that we were able to keep the house at all.
Since then the house appreciated in value. We fixed it up and sold it. We paid back money borrowed from family. This financial mistake turned out to be a financial boon 12 years down the road.
However, there was a great deal of stress and suffering that we could have avoided if we had simply waited until we were truly financially prepared.
Opening too many accounts
I’d like to think that most of my financial mistakes are behind me. But no, I’m still making them even now! The summer of 2019 my husband and I got a little bit ahead of ourselves.
We opened too many accounts at once, and it proved too much to keep up with. In the past we’ve done very well with one checking, one savings, and one rewards credit card.
It didn’t take long for that to expand into a couple business accounts, two paypal accounts and a couple rewards credit cards too. I’m sure that’s totally manageable for some couples to keep track off, but it was too much for me.
When you find yourself paying bank fees or interest, it’s time to take a good hard look at how you are managing your finances and SCALE BACK. Keep it simple. The easier it is to manage your money, the better you are going to do at it.
I do best with one checking account and our Costco rewards card. Anything else I get sloppy and end up paying more than I earn. Not worth it!
Hopefully you can do a better job learning how to manage your money, and avoid some of these common financial mistakes!
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