16 Money Mistakes Everyone Has Made—Even Financial Experts
We’ve all made plenty of money mistakes in our lives. You’d expect this from the average Joe, but you’ll be relieved to know that even financial experts make mistakes with their finances, too.
Living above your means
“After college, I got a job as an editorial assistant at a magazine in New York, making $11,500 a year. My rent in Brooklyn was $400, subway tokens were $1, and my parents helped me out with a few hundred extra each month,” shares Jean Chatzky, financial editor of NBC’s Today and host of the HerMoney podcast. “I should’ve been able to make it work—especially with the extra income I earned from teaching SAT prep. Instead, I bought clothes I didn’t need, ate out too often and exercised at the trendy workout studios. Years later (and with a higher salary), I now shop the sales, cook in more than I dine out, and run outside for free.” Here are 11 ways to save money while eating out, according to restaurant workers.
Spending too much on vacation
“The summer after I bought my first home, a studio apartment in New York City that was a great investment, I decided to do a summer share with my friends,” says Bobbi Rebell, financial journalist and author of How to Be a Financial Grownup. “It was $3,000 each and I didn’t have the cash. But I did now have equity in that apartment. So I took out a home equity loan to pay for the summer share that I could not afford. That said, I did pay off the loan—which I still remember was at 8 percent—and I did save up the cash for that next summer’s share! Now if I don’t have the cash for a vacation, I downsize, often by going for a shorter time to fit my budget, or delay until the time is right.” Learn 26 secrets rich people won’t tell you about their habits and lives.
Not following a budget
“One mistake I made was not using a personal budget,” says David Bakke, financial expert for Money Crashers. “I had no idea where my money was going on a monthly basis. Once I started using one, I looked for ways to reduce monthly expenses and then used my surplus for things like retirement investing and establishing an emergency fund.” Find out 17 habits of people who are great at saving money.
Amassing too much credit card debt
“When I got my first credit card I ran it up immediately,” says Erica J. Sandberg, a personal finance expert and reporter. “It was an American Express card and I needed a winter coat. It was $120 or so, which at the time (just after college) was a fortune. So I paid in bits, and then missed a few payments, so was hit with late charges. In the end, that stupid coat cost me many hundreds of dollars! It was an important lesson to learn. After that, I paid on time, no matter what.” Learn the real reason why not all retailers accept American Express cards.
Prioritizing saving over paying down debt
“I built up some savings, and I didn’t want to use the savings towards my debt; even though the debt was costing me 18 percent a year and my savings were earning only a third of that, my savings made me feel safe,” Chatzky recalls. “Thankfully, my roommate, who worked at Citibank, called me out. I finally used my savings towards the debt and made a plan to pay off the rest. Here’s why it makes sense: If you have debt on a card with a 22 percent interest rate, then every dollar you put towards that debt is a guaranteed return of 22 percent. That’s a significant return rate, and it’s risk-free.” Here are the 13 things debt collectors won’t tell you.
Not sticking up for yourself
“When I was around 13, I started to work as a babysitter. Because I come from a large family full of girls (six of us, all very close in age) we’d get calls from local families all the time,” Sandberg says. Some were reluctant to pay, though. I was stiffed on a number of occasions or they would say things like, “well you’re so young — how about $__?” which would be a fraction of the going rate. I was scared to speak up or say no. Today, many years later, I think about that and have no trouble pursuing payment or turning down work where the compensation isn’t fair.” This is how much the average person earns in their lifetime.
Not negotiating your salary
“I had a job I hated early in my career and I was so thrilled for the life raft that I didn’t even negotiate my salary when I got a new offer,” says Mandi Woodruff, executive editor of MagnifyMoney.com. “Soon I realized I was one of the lowest paid reporters at that job, despite having far more experience than many of my colleagues. I tried to negotiate later but it was too late. My employer didn’t give bumps of more than a few percentage points a year and I was probably getting paid 20 to 30 percent less than my peers. Even after I was promoted, I still didn’t get a big bump since I was starting off from such a low benchmark. I realized the only way to move up to a reasonable pay grade was to eventually leave that job and negotiate a higher salary somewhere else. I negotiated my tail off and wound up making 30% more.” Never accept a job before asking these questions.
Blowing a financial windfall
“The biggest financial mistake I made when I was young was blowing a financial windfall,” says Cameron Huddleston, life and money columnist for GOBankingRates.com. “When my father passed away, my sister and I both received $25,000 as beneficiaries of his life insurance policy. Sadly, I couldn’t even tell you where all the money went. I used some of the money to pay down some credit card debt, but I should’ve used the rest to pay down a big portion of the student loan debt I racked up in graduate school.” These are the 15 things everyone pays too much for.
Not taking enough tax deductions
“I’d receive a tax refund, and instead of saving it or spending it on something that wouldn’t rapidly depreciate–such as a mattress so that I’m not painfully sleeping on something that is 10 years old, for example—I would blow it on a trendy jacket that would be out of fashion the following year,” says Andrew Meadows, vice president of Ubiquity. “As I became an expert and advocate in the space of retirement and savings, suddenly it occurred to me that I didn’t want to give the government an interest-free loan. I’d rather get nothing back and have invested more of my income in my 401(k), tax-free, while compounding interest.” Don’t make one of these 15 mistakes that will ruin your retirement savings.
Not prioritizing retirement savings
“During my younger working years—and still in this industry—I wasn’t increasing my contribution to my 401(k) as I would receive bonuses or raises,” Meadows says. “Socking 4 percent of your income forever is simply not enough. I learned that my ability to get out of the race, and actually retire, required greater diligence on my part. The one advantage that 20-somethings have over 40-somethings is time. I wish I would have started escalating my contributions in my 20s. The last 15 years have been a catch up!” Take note of these 11 tips so you can retire early.