About a month ago, I asked what your biggest financial mistakes were (and shared some of mine). From funding businesses on credit cards to making rash decisions about buying property and loaning money to untrustworthy friends, the responses were quite colorful. The more the comments came in, the more I began to wonder about other money mistakes (the more common, the better) that weren’t listed somewhere on that post.

I recently read a Wall Street Journal feature in which Bill McNabb (CEO of Vanguard Group) admitted that he had his own money troubles earlier in life that included squandering almost $5K after graduating college instead of saving it and funding the last portion of business school via credit cards. After doing a bit of thinking about what I’d read, reviewing my previous post and re-reading my archives, I realized there are some general money mistakes that we should avoid at all cost.

Are you guilty of doing any of the following?

Trying to Keep Up with the Joneses

We all know someone (or perhaps are or were that someone) who’s constantly trying to fit into a world their income/finances just won’t allow for. Perhaps it’s buying the biggest McMansion in the neighborhood, the latest tech gadgets or a brand new car every other year. Maybe it’s paying for expensive country club and private school fees, household help or over-priced gym memberships. It could even be following the crowd when it comes to investing (buying the “next big thing” because your neighbor or friend speculates it’s a great stock).

Whatever it is, trying to live a life outside of your means simply to fit in, to feel like you belong or to gain social status is nothing more than living a lie. You’re lying to yourself, your family and your future. Instead of placing value on the things you have, consider valuing the people and experiences you have–my guess is that you’ll be so much better off in the long run.

Living for Today Rather than Tomorrow

Have you ever found yourself saying that you’ll take care of that bill or fix that budget tomorrow, next week or next month? Do you often find yourself feeling like you need to get “back on the wagon” when it comes to managing your money well? If so, you might be guilty of making the mistake of procrastinating; of pushing off your financial future in lieu of having more fun in the moment.

This type of fancy free living has its advantages in the present (more vacations! more fun! let’s go out whenever we feel like it!), but it wreaks havoc on any chance of a stable financial future. Sure, delayed rewards can be a tough pill to swallow when it comes to diligently socking away money in your 401K each year, but consider the ramifications of constantly putting these types of things on the back-burner: You may have to work harder and longer, you won’t be able to enjoy your Golden Years if you’re saddled with debt or don’t have enough savings to live comfortably and you might end up leaving behind a legacy of debt and financial burden for your loved ones.

When you realize you’re guilty of this mistake, you (should) realize that it’s not so fun  to piss away your money each month anymore, eh?

Thinking that Money Can Buy You Love

…or fame. …or acceptance. ….or status/power/self-esteem/friends…the list goes on. As I’ve said before, money is a tool. It is a tool that you need to learn how to use correctly, and it is not something that should be abused, taken for granted or confused as something it’s not. Case in point, trying to buy someone’s love.

Yes, you can buy the most beautiful engagement ring Tiffany’s sells, but will that ring help you get through a rough patch together? Will that ring ease the growing pains of a newborn baby crying at 3AM when you have to be up for work at 5AM? Will that ring make the day to day minutia of life seem that much more glamorous? I’d guess not.

The more emphasis you put on material objects, the more you distance yourself from financial freedom. Instead of buying your way through life, consider developing skills such as communicating and networking that will help you succeed in more ways than you’d ever imagined possible.

Botching Your Financial Priorities

Do you clip coupons to save 50 to 75 cents on your groceries but then charge those groceries to a maxed out credit card that has a 19% interest rate? Do you celebrate your tax return each year by shopping it away? What about saving your money in an online savings account for 0.8% interest but paying Sallie Mae upwards of 8% each month??

With each of these misidentified priorities, it may seem like you’re doing something responsible with your money when in reality your choices are doing much more harm than good. When it comes to sound money management, you need to stop the mental accounting, take a step back and analyze the whole picture. Doing so will help you identify your priorities for both the near-term AND long-term.

Are you guilty of any of these money mishaps? What else would you add to the list?

 

Photo credit: Tax Credits