The Most Popular Financial Mistakes You Should Avoid

It’s life: everybody make mistakes. Mistakes teach us and make us wiser, especially financial ones. However, it’s difficult to stay on the top of your finances while being ignorant about the financial traps most people fall into. Therefore it’s essential to stay prepared and alert as this may prevent you from making basic mistakes.

Here’s a list of the most popular mistakes which may harm your financial life and put serious obstacles in a way to your prosperity.

Getting Too Many Credit Cards

While all consumers would like to find the best credit card option with the most convenient terms and conditions, it’s not always a good decision to apply for every card out there as it’s likely to hurt your score. For every card you apply for, and for each time your credit score is ran, there will be a ding against your credit.

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Therefore, do your research before-hand and find the best card that meets your needs. After you’ve selected what will work for you, only apply for a few of them.

Not Checking Your Credit

Every person has a right to a free check of their credit report from each of the 3 major credit bureaus: Equifax, TransUnion, and Experian. This free report is limited to an annual basis, but you can check it more often by paying a fee.

It’s suggested that you should check each of these reports at different times throughout the year; basically every 4 months as there are 3 companies that have information on you. Go through each report and verify you own that debt and it’s been reported correctly. If you see something you disagree with, or a debt that you aren’t responsible for, then be sure to dispute it and get the information removed.

Lending Money to Family and Friends

Do not mix finances and personal relationships. Lending money to friends can destroy good relationship, so it’s better to avoid it.

In regards to your credit, co-signing for a family member or friend’s loan means that you’re completely liable if they don’t pay. Many people fail to realize this, but if they miss a few payments, or are late a couple of times, it’s going to damage your credit (as well as theirs).

Covering Daily Expenses with the Help of Short-Term Loans

Credit cards may help you to make some purchases in case you are short on cash, but they should not replace cash in you wallet. Lots of consumers today use short-term loans and payday loans to cover casual expenses and it’s not right. It only makes sense to take out a payday loan in case you really have an emergency and there is no other way for you. These loans are not intended for casual usage because they have extremely high interest rates.

Having Late and Missed Payments

Missed and late payments are the enemies of good credit. So create a payment schedule and if you know that you may forget to pay some bills, put this list in a place where you will see it each day. The first step to building good credit is to be a responsible borrower and make payments on time. So do your best to pay all the bills before their due dates.

Finding Excuses for Not Saving Money

Having an emergency fund is very important. Yes, it can be difficult to save some money when you have a limited budget, but it’s impossible to understate the importance of having cash in the bank for rainy days. You will feel more financially protected if you have some savings and in case unexpected financial problems arrive, there will be no need to borrow money and go in debt.

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About the Author

By , on Nov 17, 2013
Andy Tenton
Andy is a 30-something New Yorker who turned his financial life around. He took charge of his finances, got out of debt, and is now working his way toward financial success. He is the publisher of WorkSaveLive.com.

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{21 Comments}

  1. Bill says:

    Not checking our credit card is the biggest blunder that we can face.

    Imagine going to a shop either to buy a car or electronic and the cashier tells you that your card has insufficient fund? totally embarrassing.

    The best way is to be responsible with out credit card reports.

  2. Nick says:

    I have definitely gotten burned by mixing money with friends. Got to the point where I had to just “release” myself emotionally from it and kiss the money goodbye. I’ve now gotten pretty good at saying no… 🙂

  3. The lending money to family and friends is a very important piece. I have witnessed firsthand the damage this can cause to relationships. It may feel like generosity but really all it causes is a dependent/enabling relationship. It really isn’t healthy.

  4. Fehmeen says:

    These are some excellent tips, and I agree, many people make these mistakes on a daily basis. I know people who lent money to their family/friends and then swore never to do it again after having trouble getting it back. Similarly, lots of people sign up for multiple credit cards, and often use new cards to pay off outstanding dues on old ones. This cycle will certainly damage your financial position after a while.

  5. John Reeves says:

    Cash savings will always cushion mistakes, especially the older you become.

  6. I look at lending to family and friends with a wary eye…we’ve been on both sides of that equation. It can end up in disaster, but it can also help someone that really needs it. One thing that I know for sure…once you do it once word seems to get around….

  7. Thomas Raymond says:

    Short-term loans for luxuries and things you don’t really need right away are one of the most serious mistakes I think. Especially when it comes to payday loans. Sure, you can find people who use such loans for emergencies, when a car breaks down, or when a sudden medical bill must be covered, but even then opting for such a loan is not a wise idea. Personally, I’d do whatever it takes to avoid taking a loan altogether or at least find a less menacing alternative.

  8. Flexman says:

    You’ve neglected the worst financial mistake anyone can make, and that is “MARRYING THE WRONG PERSON”!

  9. Joe Morgan says:

    Guilty – with the exception of lending to family and friends (I never had anything to lend) and using payday loans.

    I guess we all make mistakes, the important thing is learning from them!

  10. Matt says:

    I’d agree with all of those, with the possible exception of point 1, which I still mostly agree with.

    I read a very interesting post on yahoo earlier today, (can’t find the link, doh!), about a guy who has over 25 cards and roughly $250,000 available credit across them all. Apparently, 30% of your credit score is down to what percentage of your available borrowing you use, so someone with a credit limit of $3,000 and a balance of $2,999 has a poorer credit score than someone with a $30,000 credit limit and the same balance. The guy did this for 2 reasons: 1 – a better credit score makes a lot of other things cheaper, like mortgage rates and car insurance, and 2 – all his cards have various points or cashback schemes, so depending on what he’s buying, he uses the card that gives him the best advantage. It’s pretty clever, but you’ve got to be really good with your money to make sure you don’t fall into temptation…

  11. These are practical suggestions and perhaps you can also add to these financial mistakes that should be avoided is to avoid cancelling a credit card. This will certainly hurt your credit. Lending companies want to see established or stable credit history so opening and closing an account shows that you are being erratic.

  12. I totally agree with not lending money to family and friends. Well more specifically my brother. LOL! I’ve been guilty of late payments. That just irks me because it’s like throwing money away!

    • Andy says:

      I used to have a boatload of late payments but I finally was able to get serious about financial stuff! lol. Lending money to family also has caused me some unneeded stress/pain. If I lend money these days I don’t expect it back and just “gift” it.

  13. Oh yes, I have made these mistakes, except for getting a loan to pay daily expenses. Credit cards used to be an issue, late payments, and the like. This is a great post that just shows me how far I have come in my journey toward financial independence. I can say that if you are making these mistakes, that you need to step back and figure out a better solution.

  14. I think I have made every single one of these mistakes as well….back in the day before I saw the error of my ways~! These are all true and good rules to follow.

  15. Thad P says:

    I’ve made my share of these mistakes. If you have a friend who comes to borrow money, make it a gift or do nothing. It simply eats you up and destroys friendships if you aren’t careful.

  16. I too have unfortunately made many of these mistakes. Many of them can be repaired though over time with commitment and discipline. The one thing that often can’t though is giving money to friends/family. As has been said that can really harm a relationship. I’ve come to the opinion that if someone I know needs the money, and I have it, I would rather just give it to them if they show a commitment to get out of their problem as opposed to lending it to them and expecting repayment.

  17. Lending money to family and friends can be a real easy way to sour a relationship fast.
    We lent money to my sister in law 3 years ago and are still yet to see the entire amount repaid. Fortunately it was only $200 and we could afford to lose it.

  18. I’ve made many of these mistakes, although I’ve never used a pay-day loan or loaned money to family… still, making one of these mistakes can hurt you bad. I agree with your advice to tackle one of these at a time and use you success on 1 item and apply it towards the next.

  19. Cheeryshirley says:

    Andy, I looked all over and could not discover the name or link of your guest author. It’s probably in plain sight…sigh! 🙂 Really enjoying your site. Cheeryshirley

  20. Borrowing money to buy a new car is right up there imo

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