6 Common Money Mistakes & How You Can Avoid Them

1. Your investments are not actually invested

If you have a Roth IRA, a 401K, or another investment account, make sure your money is actually being invested. Look at the amount of money you put into it, and check that it is increasing or decreasing over a few months.

If the amount of money that you have in your account is similar to what you put in there (possibly with a small amount of interest added), you probably don’t have it invested.

You can also call whoever your money is invested with and ask them, “Is my money invested?” It’s a pretty simple and quick fix. I have my Roth IRA with Vanguard, but instead of just letting it sit in my account, I chose to invest it in a VTSAX, which is a specific investment type.

2. Not creating a monthly budget

If you are the type of person who does create a budget (not everybody does) then you should be creating it monthly. The reason you need to do this is that things will look different from month to month.

There are some months when you have gifts to buy, have to pay for something expensive, or are doing home improvement. Just having a general idea of where your money should be going every single month isn’t enough.

It’s important to budget monthly so you know where your money is going and you can plan things accordingly.

3. Thinking it’s all or nothing

A lot of people will create a budget, and when they go over budget, end up throwing the whole thing out for the rest of the month, so they can start over the next month. That is absolutely not necessary.

You will end up repeating yourself, first of all, and going over every month. Secondly, you are giving yourself an excuse to go over budget in every category and that doesn’t need to happen.

Every single month I end up going over budget in one category (sometimes more) and that’s okay. I have a general range I want to stay in. Just because I go over in one category doesn’t mean I need to spend more in all categories. I’m still making progress, working towards my goals, and staying aware of where my money is going.

Don’t make the money mistake of treating your budget as all or nothing. Keep on following the budget as best you can and doing the best you can in regard to your finances.

4. Not choosing and sticking to a debt payoff method.

If you are in debt, particularly if you have multiple loans, it is wise to choose a payment strategy. You can choose the debt snowball, where you focus on the lowest balance and make minimum payments on everything else.

You can use the debt avalanche, where you focus on the loan with the highest interest rate. The third method is to focus on the loan with the highest minimum payment, so you can free up money to pay other debts.

They are all similar methods. The important thing is you are choosing one of them and sticking with it. Otherwise, you won’t make much progress on your debt and it will just slow things down and hinder your progress.

I’ve seen this money mistake in action; people put money towards their loans but don’t make much progress. They are paying in a way that’s completely disorganized and not following a plan. You will definitely see the results once you choose one of these methods and start following it.

5. Not asking for lower rates and/or discounts

This applies to debts or large bills. One of the first things I have my clients do if they have credit card debt is to call their lenders and ask for a lower interest rate. Nine out of ten will say yes. This will help you pay off your debt a lot quicker and save money.

With regard to discounts, I’m not saying you should go to the store or a restaurant and ask for 10% off, but more so ask for a discount on large bills, like medical bills.

Many years ago, when I made a very low income, I had a large medical bill that, at the time, was basically impossible for me to pay, so I qualified for the low-income scale offered through this medical company.

I submitted a form and it decreased my balance by like $600. I ended up paying $50 for a $700-something charge. It was a huge decrease and saved my financial situation.

So, always ask. Don’t be afraid. The worst they can do is say no.

6. Don’t assume pre-approval is a guarantee

Firstly, sometimes you get pre-approvals for credit cards in the mail. I’ve heard of people applying for these cards because they think they are supposed to or it’s a good thing. It may not be. Just because you’re pre-approved for a card, and get mail or email about it, does not mean you should or need to sign up for that card.

Secondly, the pre-approval is just an estimate, it’s not a guarantee that you will be approved for the credit card. You definitely need to do your research first. Make sure you’re in a good situation financially and have a healthy credit score, before applying for the card.

On the credit karma app, they display a list of pre-approved cards, and if you look at the review on there, a lot of people complain they were pre-approved, and had a great approval rating, but didn't get approved. Not getting approved can be a hit to your credit score and make it more difficult to get approved for future cards.

You can’t trust these pre-approvals. You need to do your own research. Look at the credit score they’re looking for, and more details on the requirements. Sometimes you’ll see a card that you fall into the approval range for, and you still get denied. That’s just how things are.

Common money mistakes

These are just six simple, random, but common money mistakes. What mistakes have you seen others make? Let us know in the comments.