We all make mistakes, especially when it comes to money. Whether you’re just starting out in your career, nearing retirement or somewhere in between, certain financial slipups can have long-lasting consequences.
The tricky part is that some of these money mistakes aren’t always obvious at first. They can sneak up on you when you least expect it.
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For this reason, GOBankingRates spoke with finance expert Andrew Lokenauth, money expert and owner of Be Fluent In Finance, to discuss some of the most common (and costly) financial blunders that can affect your future, no matter your age.
Whether it’s a sudden car repair, an unexpected medical bill or even a loss of your job, emergencies can strike at any moment. Without a financial cushion, you could be forced to rely on credit cards or loans, which can then lead to debt spirals and added stress.
One survey from U.S. News & World Report found that 42% of Americans don’t have an emergency fund.
“Living without an emergency fund drives me crazy,” Lokenauth said. “I can’t tell you how many clients I’ve seen drain their savings or rack up credit card debt because they didn’t have a safety net.” Last March, one of his clients lost his job and burned through $15,000 in credit card debt because he had zero savings.
He recommended having at least three to six months’ worth of expenses saved.
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It’s easy to assume that just because you’re not overspending on big-ticket items, you’re managing your finances well. But small, everyday purchases can also add up quickly. Without tracking where your money is going, you’ll find yourself surprised by how much you’re actually spending on things like dining out, small subscriptions or impulse buys.
Not tracking spending is a massive mistake Lokenauth sees constantly.
“I personally use a budget app to monitor every dollar — it’s shocking how those $5 coffee runs add up,” he said.
He noted that the average person wastes about $400 per month on random purchases they don’t remember making. “Been there myself,” he explained.
Holding on to credit card debt is one of the biggest financial mistakes you can make at any age, and it can be absolutely costly. Currently, Americans are struggling with a record amount of credit card debt — $1.211 trillion, per LendingTree.
Credit cards often come with high interest rates, which means if you’re making only minimum payments, your debt can quickly get out of control.
“Credit card debt is an absolute killer,” Lokenauth said. “The interest rates are brutal — usually 15% to 25% — and the debt snowballs fast.”
He worked with someone who only made minimum payments on a $3,000 balance, and it took them over seven years to pay it off. “They ended up paying almost double the original amount,” he explained.
Ignoring retirement savings is one of those mistakes that can really come back to bite you, no matter how old you are.
It’s easy to think you’ve got tons of time to save — especially when you’re younger — or tell yourself you’ll catch up later when you’re making more money. But the sooner you start saving, the better, because that gives your money more time to grow.
“This one keeps me up at night,” Lokenauth said. “Time is your biggest advantage with compound interest, but so many people wait too long. I started investing 15% of my income in my late 20s, and it’s the best financial decision I’ve made. That money has grown substantially.”
One big accident, a major health issue or one big emergency can wipe out your savings in no time if you’re not properly covered. It might seem like an extra expense that isn’t necessary, but paying for insurance is a lot cheaper than facing massive bills without any help.
According to Lokenauth, not having proper insurance is playing with fire. “Whether it’s health, life or disability coverage, going without protection can destroy your finances in an instant,” he said.
He explained that medical bills are the No. 1 cause of bankruptcy in the U.S. “I’ve seen families lose everything because they skipped insurance to save money,” he explained.
This is a big no-no. We’ve all seen those flashy ads promising big returns with little effort, but the truth is, if it sounds too good to be true, it usually is.
Whether it’s a sketchy investment, a “too easy” business opportunity or some high-risk gamble, these shortcuts to making money almost always end in major disappointment (and often a whole lot of lost cash).
“Falling for get-rich-quick schemes and risky investments makes me want to scream,” Lokenauth said. “Those crypto and meme stock horror stories are endless.”
He explained that one of his clients lost $50,000 trying to day trade. “That’s half their retirement savings gone. Slow and steady investing wins every time,” he said.
This is a classic money mistake for many and can easily mess with your finances. Just because someone else has the latest car, designer clothes or fancy vacation doesn’t mean you should be aiming for the same. It’s way better to focus on your own financial goals and live within your means.
Keeping up with the Joneses will wreck your finances fast, Lokenauth explained. He’s seen people financing luxury cars, vacations and homes they can’t afford.
“Social media makes it worse. The thing is, most of those ‘rich-looking’ people are drowning in debt. I drive a five-year-old Honda and couldn’t be happier,” he said.
Without clear goals, it’s easy to drift through life without purpose or direction, making it harder to save, invest and plan for the future.
Whether you’re wanting to save for a vacation, buy a house or build a retirement fund, having specific goals helps you stay focused and motivated. Not having financial goals is like driving without a destination, according to Lokenauth.
“You need clear targets for saving, investing, debt payoff — whatever matters to you. I help my clients set specific numbers and deadlines. Makes a huge difference in staying motivated and measuring progress,” he said.
Without goals, you’re kind of just winging it, and that can lead to missed opportunities and financial stress.
Avoiding money conversations with your partner leads to disaster, according to Lokenauth.
“Money fights are a leading cause of divorce. Been there — almost ruined my own marriage by hiding purchases. Now my spouse and I have monthly money talks and joint financial goals. Game changer,” he said.
While it might feel awkward at first, ignoring these conversations can lead to misunderstandings or bigger issues down the line. Whether it’s about how you’ll budget, save or plan for the future, being open with each other about money keeps you both on the same page.
It’s all about making sure you’re aligned on goals, your debt and how you’re handling things together as a couple.
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This article originally appeared on GOBankingRates.com: I’m a Money Expert: 9 Money Mistakes That Could Be Detrimental at Any Age
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