Making mistakes is a part of life. And they’re not always bad things – we learn a lot from mistakes. But some mistakes can be extremely costly.
I’m here to hopefully stop you from making these financial success-sabotaging mistakes (some of which I’ve made myself) or to point out some mistakes you might be making without being aware of it.
Here are 10 financial mistakes to avoid at all costs:
1) Allowing lifestyle creep
“Lifestyle creep” is when you gradually start spending more money on nonessential items as your income increases. That can mean higher rent, expensive hobbies, more nights dining out, every new iPhone… Things that used to be luxuries become necessities.
Now, I’m not saying that you can’t treat yourself, but as your income increases, the amount that you’re saving should also increase.
Make sure that you aren’t JUST spending money because you can. Figure out your three to five core values – like freedom, success, or kindness – and spend your money on things that align with those values. If something doesn’t align, then think twice before you spend money on it.
How to make better spending decisions!
2) Investing BEFORE you pay off high-interest rate debt
Women ask me all the time if they should invest while they still have debt or wait until they pay it off.
My question is – what kind of debt do you have?
If you have high-interest rate debt – meaning debt with an interest rate above 7% – then you need to pay it off before you invest.
See, stocks on average offer an 8-10% return. So, if you have credit card debt with a 25% interest rate, there’s no point in investing because you will always owe more money than you can earn through investing.
If you have low-interest debt, like a mortgage or student loans, then it’s ok to invest. (Of course, it’s still important to focus on paying down that debt too!)
If you need help paying down debt, then check out our free 5 Days to Debt Free mini-course.
3) Procrastinating on paying off high-interest rate debt
High-interest rate debt is holding you back from building wealth. After all, you can’t start to invest until you pay off high-interest debt.
4) Missing out on employer contribution matching
If you have an employer-sponsored retirement account – like a 401(k) – and your employer offers matching, take FULL advantage of it!! This is free money! Don’t miss out on it.
Contribute the maximum amount that your employer will match.
5) Paying for subscriptions you don’t use or need
On average, consumers spend $133 more on monthly subscriptions than they realize…and more than 40% have forgotten that they are still paying for a subscription they no longer use according to a recent C + R Research study.
So, this is your reminder to stay aware of how much money is coming in and out of your account every month. Take a look at how much your streaming services, magazine subscriptions, and Fab, Fit, Fun boxes are costing you and ask yourself:
- Do I use this?
- Does this add value to my life?
- Would I miss this if it were gone?
- Could I be investing this money into something that adds MORE joy and value to my life?
The women+ I’ve worked with who have had the most success in turning around their financial situation have set up a weekly money ritual where you check your balance and expenses once a week. That way, you don’t get any nasty surprises when you look at your monthly bills.
6) Blindly leaving the finances to your partner
A lot of women+ choose to leave money management to their partners. And there may be good reasons for it.
I’m not saying that you need to be involved in every part of the household finances if that doesn’t work for you and your partner. But you should understand personal finance enough to be able to intelligently discuss financial decisions and understand what is happening with your money.
After all, if you don’t understand personal finances, how can you know if your partner is doing a good job managing money or not?
Your partner may be doing a great job – but you can’t know that if you never invest in financial literacy or have financial conversations with your partner.
If you need some tips, my husband and I have talked about how we manage our finances as a couple!
7) Not investing for retirement
A lot of people assume that because they’re saving for retirement, they’re invested. But that’s not true.
Make sure you’re invested so your money is growing for your golden years.
8) Not saving an emergency fund
Life is unpredictable. You may get laid off or your car could break down. When unexpected expenses pop up…how do you pay for it?
An emergency fund is a stash of money set aside for when life’s surprises come with a price tag.
It’s crucial to have an emergency fund set aside so that when you need to take the dog to the vet or fix the washer, you have the money to handle it without jeopardizing your financial security.
9) Not having a money plan
Have you ever heard, “Failing to plan is planning to fail”? That’s true when it comes to your finances. Not having a money plan is one of the best ways to lose money.
The pillars of a money plan include…
- Creating a budget
- Tracking your expenses
- Setting financial goals
- Building an emergency fund
- Planning for retirement
- Strategizing to pay down debt
10) Not pursuing financial education
This is a mistake so many women+ make. And it’s not entirely their fault – boys are often raised with the expectation that they’ll manage money someday and girls usually aren’t.
If you want to take your financial education to the next level, then check out our signature program, the Million Dollar Year. In it, give you all the information, tools, and support you need to manage your money like a pro, make confident and informed money decisions, and build financial security that lasts a lifetime.
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