financial independence

10 Money Mistakes to Avoid

As creatures of habit, who like to repeat the same behavior, our personal finance habits have an enormous impact on our financial well being. Unfortunately, all too many people fall victim to the same common money mistakes.Recognizing and eliminating these mistakes is the first step to financial independence. Here are the money mistakes that you need to avoid. How many are you guilty of?

Impulsive Spending

The source of most personal debt is spending more than you need. Don’t go shopping when you’re bored, you’ll buy things you’ll rarely use. If you are prone to impulsive shopping, try to make a clear plan for what you need to buy, and what you need to avoid. If you really want something, you can come back the next day — be patient when shopping.

Being Swayed by Sales Techniques

Big companies try many tricks to get us to buy goods we don’t really need. For example, don’t be swayed by 50% sales promotions; just because it is on sale doesn’t mean it’s good value or that you need to buy it. Don’t get excited over every 3 for the price of 2; otherwise you will just start to accumulate things you are never going to use. If you feel pressured by salesman, walk out — if you really want the product you can always come back.

Never Checking for Cheaper Deals

For many items such as mortgages, electricity and gas suppliers, our existing company takes advantage of our customer loyalty by charging higher prices. This reluctance to move is called customer inertia; for example, people think it is too much hassle to move their mortgage, so they stick with their existing company. However, if they looked around and re-mortgaged they may be able to save considerable amounts of money. For the time involved it’s a great value. Think of it like this, if you went into a shop would you buy a good which is exactly the same, but 20% more expensive?

The ‘Poor Me’ Attitude

If you have an attitude of poverty and feel sorry for yourself, it’s difficult to do anything about it. If you feel that the world is conspiring to make you poor, it’s likely to come true. This doesn’t mean I advocate a blind belief that repeating a few money mantras will solve all your financial problems. But you need to avoid a negative attitude and look at how you can constructively move forward and improve your financial situation.

Not Having a Savings Plan

It is true that in your 20’s, it can be difficult to save because you have student loans to pay off e.t.c. Saving will hopefully become easier later in life. However, if you put it off to long, you’ll eventually find yourself in your 50’s with no savings or contingency plan. The earlier you start saving the more productive it becomes. If you can get into a regular savings habit, it’s easier to increase the monthly deposits as your financial situation improves.

Making Wealth Accumulation the Purpose of Life

My boss is a multimillionaire, but, he is never satisfied. He always wants more; it really pains him to spend any money. Money and wealth are not a bad thing; but, they can be if we love them to the exclusion of all else. Life isn’t all about saving money for retirement. You need to maintain a sense of balance between money and the rest of life.

Letting Money Spoil Friendships

It’s a mistake to rely on friends to bale us out of money problems. Occasionally it may be necessary, and we should not let our pride prevent us accept help when in dire straits. But, at the same time we should try to avoid making it a habit. Nor should we feel responsible to deal with our friends financial problems.

Not Tracking Your Finances

Many people have no idea how much they spend or how much debt they have. As things worsen it becomes less attractive to find out our true financial state. Unfortunately, ignoring your problem will never make it go away. Being aware of your circumstances is essential to moving forward.

Gaining an Adverse Credit Rating

Missing credit card or loan payments might cost you penalties and interest payments, but the main problem is that it adversely affects your credit rating. This makes it more difficult and expensive to get credit in the future. Adverse credit payments can often be avoided by setting up direct debits, and speaking to your bank when difficulties arise. It is also possible to appeal against one off late payments — offering an excuse such as getting delayed in the mail.

Borrowing at High Interest Rates

If you do create unavoidable debt, make sure you move it to the lowest possible interest loan. This might be a 0% introductory period on a credit card, or perhaps putting debt onto your mortgage. Avoid at all costs borrowing at interest rates of 17% – 25%, which you see on some credit cards.Tejvan Pettinger works as an Economics Teacher in Oxford. He writes frequently on economics and issues of personal finance. He also updates a site on personal finance and mortgage advice. This includes recent articles such as 10 Effective ways to Reduce Debt.

72 Responses to 10 Money Mistakes to Avoid

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  6. Sadly, our consumer culture has made spending a pastime. I would say instead of impulse buying, go do something fun or sporty, which usually wouldn’t cost money. There are some great resources on the web for things to do that don’t cost much or any money.

  7. John Wesley says:

    Taylor, you’re completely right. Often times the free alternative is more healthy and enjoyable that the things we pay to do.

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  9. crash course says:

    Good list but I think you missed the #1 – Believe in yourself and know that you deserve to be financially OK or better!

  10. John Wesley says:

    That’s a good point crash course. I think that is partially covered by the “poor me” point.

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  12. Eric Monse says:

    Great tips. Sometimeds discipline is the hardest thing. – Eric Monse

  13. I’m so glad you finally touched on behavioral finance because it’s the most important part! I HIGHLY recommend “Why Smart People Make Big Money Mistakes” for anyone wanting to identify the errors they make when it comes to finances and how to correct them. It’s a fantastic read! (

  14. business says:

    Ouch, the truth hurts. I’m guilty of 7 out of the 10 of those. Thanks for pointing this out. I’m going to print this out in huge fonts and post it everywhere.

  15. Don’t try to keep up with the Jones’. I get asked why I still drive an old Saturn with roll up windows when everyone else seems to be driving newer cars every year. Currently a full 30% of my salary goes to retirement.


  16. John Wesley says:


    I like you style, a bit of frugality combined with investment can turn into major wealth down the road.

  17. local gordon says:

    I think lifeskills are important in deciding if someone stays poor or gets rich. Our consumer culture is devoted to keeping people poor and wanting more.

  18. A bit of frugality goes a long long way.

    Try haggling. Sure it seems odd at first but it can pay off nicely.

  19. Trogdor says:

    Or, put another way … aim to live *below* your means, rather than trying to stay caught up with the Joneses. Here’s hint – the Joneses are broke! You sure wanna be like that?

    Here are 3 simple steps to move toward financial peace:
    1) Save up for an emergency fund of $1000
    … stop impulse buying, make and stick to a budget, and get $1000 saved – but don’t dare use it on anything except an emergency (paying down your debt, while good, is not an emergency, nor is investing in the stock market so don’t put it there either)
    2) Start paying down debts, with your smallest-one first (depends on interest rates … and by the way, get rid of all credit cards!)
    … it’s called the debt snowball, and you basically start with the smallest piece of debt and put as much as you can toward it, while paying just above the minimum on the others. Then, when the first small loan is paid off, add the amount you used to pay toward it to the amount you’ve been paying toward the 2nd one. When it’s paid off, add all that toward the 3rd. And so on.
    3) Save up for a fully funded emergency fund (3-6 months of your living expenses)
    … Murphy’s law says bad stuff will happen. If you have a large emergency fund saved up, Murphy will still come around, but he won’t give you as much of a beating as before.

    There are a few more steps, but those are the ones to focus on, first.

    For some outstanding advice, see this guy – he’s been rich, then poor, then rich, and figured out what bad habits to avoid, and what good habits to keep:

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  24. thanks Trogdor. I need to work on the savings part…

    >> Robert, I agree always too much stress trying to keep up with Joneses

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  28. Richard says:

    There’s an important counterpoint to moving debt to lower interest rates: make sure it sticks! If you add all your credit card debt onto your mortgate/home equity credit and then go shopping, you keep the same credit card debt and get a few thousand dollars more on your mortgage.

    Doing something like that or a balance transfer to a card with an introductory rate is good when you’re really committed to paying off your purchases in full each month and eating away at the balance you built up, but want to avoid some of the interest you’ll have to pay before it’s all gone. If you do it for other reasons you may just be circumventing the credit limit that would otherwise protect you.

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  38. You may have heard it said that 90 percent of success in life is the result of just showing up. Although we don’t have statistics to support the idea, it’s probably fair to say that 90 percent of financial and investment success is just taking the time to pay attention. Stop for a moment or two in your daily routine and take time to really examine your finances. The current and future benefits can be enormous.

    Nowhere is this more true than when considering credit-card debt. According to Consumer Federation of America, the average credit-card debt for the U.S. households is $8,400. And each of an estimated 60 to 65 million households pays an average of $3,800 a year in interest and fees. It’s no wonder that Opinion Research Corporation reports that 55 percent of all households are “very concerned” about meeting their monthly bills.

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  39. Emerson says:

    Good stuff. All of these tips are great – thanks!

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  43. “As creatures of habit, who like to repeat the same behavior, our personal finance habits have an enormous impact on our financial well being.”

    These words hit me upside the head like Louisville Slugger! As a Financial Coach I am always guding my clients to delay pleasure. Thank you for your honest approach.

    Matt Sullivan, CEO of Credit Dusters

  44. NLP says:

    This is a great list, and great comments as well. I would strongly emphasize the point about not tracking your finances, because several of the other behaviors can be wrapped up in that. The tendency to stick one’s head in the sand, especially during bad times, too often leads to impulse spending in order to temporarily feel good, and general paralysis on all financial fronts.

    The math is remarkably easy–the psychology is the real trick.

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  51. Good post. I recently wrote an article about how companies trick you into spending your money with sales and the like. You might find it interesting.

  52. party gowns says:

    yeah, i think we should have a money plan!

  53. David Wilson says:

    Thanks for the post, great information. People forget that making small changes can make a huge difference in their overall financial status.

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  56. Thanks for the tips. I never borrow or lend the money to anyone :)

  57. desicolours says:

    i always have a savings plan which will be used in our tougher times..

  58. saw this a day or two ago on zollo

  59. I like the part that you talk about Adverse Credit Ratings. Some people are unaware about what bad credit can do to you. The good news is that bad credit ratings can be resolved. These are tough economic times.

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    Nice to meet you!

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  64. mdnazmulh says:

    I want to do masters. Alas! I don’t have money to pay tution fees.  I wish education would have been cheaper!

  65. Solidus608 says:

    this is so dumb that we have a system that promotes debt over shared wealth they just make more opportunities for debt than they make for wealth. we are a consumption society this culture must change to abundance and shared wealth over individual wealth.

  66. Solidus608 says:

    this is so dumb that we have a system that promotes debt over shared wealth they just make more opportunities for debt than they make for wealth. we are a consumption society this culture must change to abundance and shared wealth over individual wealth.

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  68. ambreen11 says:

    Great post. Thanks for share it.  Many Beginners Start blogging only for money, This is not bad But focusing only on money can ruin your plan.

  69. Penny says:

    Your post might be taken more seriously if you could spell properly or use the correct punctuation

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