5 Common Money Mistakes That Are Worse Than You Think

  • One of the most common mistakes related to money is the inability to enjoy your hard-earned money.
  • Some people become so insecure about how to manage their money that they lose control of their spending altogether.
  • Financial infidelity, or lying to your partner about money, can turn into bigger problems later on.
  • Read more Personal Finance Insider stories.

Everyday money mistakes that seem small right now can turn into bigger problems later.

We asked a financial therapist and a financial behaviorist, who teach at Kansas State University, about the most common financial mistakes people make.

Surprisingly, they didn’t talk about 401(k) plans, skipping morning coffee, or how much you should have in your emergency savings fund. Instead, most of these overlooked mistakes are behaviors that put him in a vague or negative headspace when he handles his money.

Here are the five most common money mistakes people make and what to do instead.

1. Focus too much on saving money

What to Do Instead: Make Room in Your Budget for Comfort Expenses

“If you just focus solely on trying to budget, trying to maximize savings, you’ll burn out. And you’ll burn out fast,” said behavior finance specialist Blain Pearson, Ph.D., CFP.

Pearson warned that focusing too much on your savings account number can cause you to miss out on social connections, fun and once-in-a-lifetime experiences.

People don’t take the time to “get over the guilt that comes with spending money,” he continued, especially money saved for a special purchase.

While having the insurance and safety net of a savings account is important, Pearson said, “you want to look at money as an access tool.” Think of money as a tool that allows you to enjoy life, rather than something to obsess over.

2. Not keeping track of your spending

What to do instead: look at the numbers for five minutes every day

“A lot of people feel insecure about their inability to manage their money, so they just avoid it,” said financial therapist Megan McCoy, Ph.D., LMFT, AFC, CFT-I.

She shared a story about her students renting electric scooters that were recently installed on campus. Even though each rental session was only $5 to $7, her students didn’t realize how quickly it added up, and soon they were spending all their money on electric scooters. That would have been fine… if it had been a conscious decision.

“Tracking expenses can help you decide, ‘I love it, this is worth it. This makes me happy,’ or ‘I’m not enjoying any of this,'” he said.

Rather than remain vague about your spending, McCoy suggested getting an app, or putting cash savings in envelopes, or “whatever works best with your learning style” to see where your money is going. Spending just five minutes a day cultivating spending awareness can have a big impact.

3. Rushing to buy things too quickly

What to do instead: Sleep in it

“Anticipation is always better than reality,” McCoy said.

If you’re booking a trip, daydreaming about things you want to do on vacation and counting down the days can be just as much fun as the actual vacation.

McCoy referenced a study in which experimenters filled a large snack table with equal parts healthy snacks and sugary snacks. When participants were asked to choose a snack for this time, most people chose a sugary snack. On the other hand, when participants were asked to choose a snack for tomorrow, they were more likely to choose healthy snacks.

McCoy said we’re more likely to make better decisions for ourselves in the future, and the same mindset can be applied when making big purchases or booking travel.

When buying expensive items, it helps to wait 24-72 hours, which gives more time for more expensive purchases.

4. Not communicating with your partner about future goals

What to do instead: Facilitate money conversations by asking hypothetical questions

McCoy and Pearson agreed that they see “lack of communication between partners about future goals” in their practices and studies.

If one partner dreams of retiring near the ocean and the other wants to retire near the mountains, both partners need to come together to find a compromise to work together toward the same goal.

For example, Pearson said, “If you want a humbler retirement experience to trade for higher current consumption, talk to your partner about it.”

Being on separate pages about future plans can plant seeds for bigger problems down the line, like financial infidelity, the act of keeping financial secrets from your partner.

Facilitate conversations about money by asking your partner hypothetical questions. What would you do if you won the lottery? What would you do with your money if you didn’t have to pay off your student loans? These questions can help break the ice, taking the awkwardness and tension out of talking about money.

5. He only deals with finances when something is wrong

What to do instead: manage your money throughout the year

McCoy said that one of the biggest money-related mistakes is when people only deal with finances when “something is on fire,” so to speak.

“It creates a vicious cycle,” he said. Every time you deal with your money, it sucks, so you avoid dealing with your money. In turn, not managing money causes more financial problems and the cycle starts all over again. “It may be a self-fulfilling prophecy,” she continued.

McCoy and Pearson suggest managing your finances throughout the year, rather than just looking at your money when there’s an emergency. Dealing with finances in a calm state and with ample cash flow can help you plan ahead for emergencies and save for short- and long-term goals.

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