Updated: January 2, 2021
Many say that experience is the best teacher. And learning from the experience of others is the smarter and painless way to do it.
Below are the most common financial mistakes that people make at different stages in life. A lot of them are sentiments from people I’ve met, while a few are of my own. See which among them you are committing.
In your 20s
Not building an emergency fund
An emergency fund is more than just a source of immediate cash when you have an unforeseen expense. Building it will teach you the habit of saving.
Furthermore, creating an emergency fund, which is typically six months’ worth of your expenses, will help improve your spending habits as well.
Abusing credit cards
One of the best ways to avoid going into credit card trouble is to set aside the same amount of money every time you use it.
This way, when the bill comes, you already have the cash to pay the debt in full. And thus, you won’t incur any interest charges. And so it also follows that if you don’t have the money to set aside, then you shouldn’t use your credit card.
Not learning about personal finance
Financial education is rarely taught in school, but it is knowledge that will be useful for your whole life. Take the initiative and self-study on proper money management and investing.
You paid tuition in college to have a good career. So why not spend on books and seminars to have a financially secure future? You can’t always rely on free resources for learning.
Neglecting saving for retirement
Your 20s is the best time to start saving up and investing for retirement because you have time on your side.
You can afford to put your money in high-risk instruments, such as the stock market or equity funds, which can grow significantly and passively over the decades.
Not establishing healthy habits
Medical expenses will be one of your biggest stressors in life. But as they say, prevention is better than cure.
That’s why it’s important to live a healthy lifestyle as early as possible. Know your mind and body, and learn how to properly take care of them. You (and your wallet) will thank you in the future.
In your 30s
Keeping up with the Joneses
You should realize that your self-worth is not dictated by the material things you own. And people who judge you for that stuff aren’t your friends.
There’s nothing wrong with wanting and buying stuff. But make sure you can afford them, and you’re buying them for yourself and not just to impress other people.
Disregarding life insurance
Life insurance is necessary, especially if you have a family and kids. If you’re single, but you’re planning to get married in the next few years, then it’s a good idea to get one early while it’s relatively cheap.
Not yet investing
You have a lot of financial responsibilities during this time of your life. But you are also responsible for your financial future, so make sure you’re investing in it.
Not having financial goals
Set on achieving financial milestones during this time because it’s the decade when people are usually most productive, not just at work but in life in general.
You can plan on buying your first car or your own house. Maybe it’s time to develop and start your own business. Or begin traveling. It is your choice, and regardless of what you choose to do, make sure that your goals inspire you.
In your 40s
Being buried in short-term debts
Work on paying off your credit card debts and personal loans. You shouldn’t really be carrying any short-term debts at this point.
If you have a family, this is the time when your expenses peak. Proper money management skills are your best tool against going broke.
Letting midlife crisis ruin your finances
You may or may not experience a midlife crisis. But if you do, make sure that you don’t do anything that will make you bankrupt or jeopardize your financial future.
Having no long-term health care plans
If you skipped this during your 30s, then it’s time to get one now. You’re not getting any older, and your medical expenses in the future won’t pay for themselves.
In your 50s and beyond
Taking in too much financial risks
It’s tempting to put money on high-yield investments, especially if you haven’t saved enough for your retirement. But the luxury of time is no longer on your side, so choose to invest a little conservatively.
However, it’s never too late to become an entrepreneur, if you haven’t done so yet. Not only can a business produce passive income for you, but it will also help you to be mentally active beyond retirement.
Not doing estate planning
Death is inevitable. And the last thing you want when you die is to leave your grieving family with financial burdens. Or worse, fighting over who gets what from your assets and properties.
Becoming an emergency fund for your children
It’s hard to resist your children when they need financial help. But make sure you are not enabling their codependency. Help but not at the expense of your own financial needs.
Have you committed any of these mistakes? What more can you add? Share them below in the comments section.