What Are Some of the Most Common Money Management Mistakes?

Remember the movie “Groundhog Day,” the one where Bill Murray kept reliving the same day? Some people live their financial lives like that, making the same mistakes over and over. But you don’t have to be one of them.

To help you avoid being a repeat offender, here are some of the common money errors that many of us make repeatedly, along with the real-world cost of each and a better way to handle each situation.

Spending without a budget.

If you have income and bills, you need a budget. Too many times, there is more outgo than income. Unless you actually keep track of what you spend, you can easily underestimate your spending by 15% to 20%.

Keep track of what you spend to get an idea of where your money is going. The key to success in this area is keeping track of the tings that aren't regular bills like groceries and entertainment expenses.

And set some money aside for one-time emergencies, like car repairs, a broken appliance or a trip to the emergency room. People tend to leave those kind of expenses out of a budget even though they are inevitable.

Carrying a balance on credit cards.

Interest rates can be 18% to 21% or more on credit cards. Depending on the account balance, people making minimum payments can never get the tings paid off. Another way to think of it: Treat yourself to a nice dinner, and 20 years from now you’ll still be paying for it. In general, carrying a balance on your credit cards is a terrible idea.

Pay balances in full each month if at all possible. If you need to use a credit card to handle an emergency (medical bills and car repair bills, not vacation) use it, then stop using credit until that bill is paid.

Failing to recognize how much little purchases add up.

Small amounts, like small leaks can really drain your wallet. Start to analyze everything from those nonessential snacks to out-of-network ATM charges to those extra plan minutes you’re not using. These costs take a good chunk more of your paycheck than you realize.

Take records of your cash purchases and lay them side-by-side with your debit and credit card statements to get a complete picture of where you’re spending. Analyze where you are spending money and if it makes sense.

Not taking advantage of an employer match for retirement funds.

One of the biggest mistakes that lots and lots of people make, especially young people, is not investing in their employer’s retirement plan at least up to the point where they get the employer’s matching funds.

Take advantage of these plans. Figure out how much you can afford to contribute, and have the money taken out of your check prior to receiving it. You will learn quickly not to miss it.

Paying everyone else then saving ‘whatever is left.’

If all you manage to save is scraps here and there, that is what you’ll end up with at retirement.

Pay yourself first! Take at least 5% to 10% of your paycheck to max out your retirement plan.

After that, save outside of the retirement plan.

Spending financial windfalls unwisely.

Financial windfalls like tax returns or inheritance just seem to slip through the grasp of many people. So many have the mentality of just going on a shopping spree or expensive vacation instead of saving and holding onto that money for when they really need it.

Instead of just blowing that money, create an emergency contingency fund with these windfalls to pay for those unplanned expenses that will occur. Your car will need repairs, medical expenses will arise, the kids will need money for school events, etc. Planning for this stuff ahead of time will enable you to avoid having to use credit cards for these expenses.

By avoiding these common financial missteps, you can start yourself down the road toward a more stable financial environment now and a brighter financial outlook for the long term.