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To err is human. But you can avoid catastrophe by heeding others’ advice.

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If you pay your credit card bills on time, have a decent credit score, and are able to resist signing up for a department store credit card, you probably think you’re in good financial shape. And maybe you are.

But even people who are healthy financially make some common money mistakes, and they add up over time. Here are the ones we think you’ll regret the most, and how to avoid them…

1. Spending more than you earn

The easiest mistake to make on this list can also be the easiest one to fix. That doesn’t mean it’s easy: You can’t avoid watching your checking account because you’re scared of what you’ll see. You also have to do the math and deny yourself some things you want, or work harder than other people to get them.

How to avoid it: See No. 2.

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2. Not sticking to a budget

To stick to a budget, first, you have to make one. Then, you have to be diligent about where your money goes. Not sure where to draw the line? Use the 50/30/20 guideline, where:

  • 50 percent of your income should go to your fixed expenses, like rent or a mortgage, transportation, and utilities
  • 30 percent should go to flexible spending, like groceries, eating out, entertainment, and gifts
  • 20 percent goes to financial priorities, in this order: debt, emergency savings, and retirement

How to avoid it: Sites like Tiller can help you track your spending automatically, but they still require some management and fine-tuning from you.

They try to break things into categories like Food and Dining, Travel, and Miscellaneous so you can literally see where your money is going, but may not get everything right — and if they don’t, you can’t be sure which categories are going over budget. But it beats pen and paper by a long shot.

3. Becoming financially dependent on credit cards

Placing too much reliance on credit cards — a form of “revolving debt” — can cause serious problems for your financial health, including No. 1 above.

There are two reasons for that: You can’t always predict how much of your income will be eaten up by a credit card bill at the end of the month. And making the minimum payments on your debt is an easy way to rationalize that you’re getting out of debt. That can lead to higher interest, an inability to make payments, and damage to your credit.

How to avoid it: Don’t make excuses for yourself, and don’t procrastinate. Saying things like, “My credit card debt isn’t as bad as my brother-in-law’s” or “I’ll just make the minimum payment this month; next month I’ll pay my balance off” are really good ways to keep yourself in an ever-increasing cycle of debt.

Tired of struggling to pay off credit card debt on your own? Talk to a certified consumer credit counselor to find relief now.

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4. Not doing the math before taking out student loans

If you’re planning on funding higher education with student loans, you should have a plan to pay it back.

That doesn’t mean working all during college and saving what you can, though that helps. It means, before attaching your signature to anything, take the time to read the fine print and attend a meeting with a financial aid counselor. Don’t blow through the entrance counseling usually required to take out a loan.

How to avoid it: Fill out the Free Application for Federal Student Aid if you’re a student or a parent of a student to find out if you qualify for any grants, which don’t have to be repaid. Seek out every scholarship opportunity you can. If that’s not enough, then start shopping around for, and reading up on, student loans.

Go for subsidized federal loans first, then if needed unsubsidized ones, and lastly, private loans. The difference is this: Federal loans usually have lower interest rates, and subsidized ones don’t charge you interest while you’re in school. Federal loans also come with more options for repayment, including income-based repayment plans [1].

Bottom line: Student loans are a tricky business, so make sure to research everything and ask questions if you aren’t sure what’s going on.

5. Failing to make an emergency fund

Learn to expect the unexpected. Getting sick, having a car break down, or needing a home repaired are all expenses that you are pretty much guaranteed to have within the next 10 years.

That’s why an emergency fund is so important — not just to have for a “rainy day,” but to use in case you or your spouse lose your job or there’s a death in the family.

How to avoid it: If you’re budgeting carefully, you’ll find at least a few dollars to tuck away from every paycheck. Make it a goal to save a month’s worth of expenses. Then two, then three. It’ll sting at first, but make your life less stressful in the long run.

6. Buying new when you can buy it used

Cars, yachts, RVs, electronics — these are just a few of the large purchases that lose value quickly. A new car loses thousands of dollars in value before you even get it in the garage.

Sure, new should mean reliable. But it’s a really expensive shortcut, especially if you take out a car loan.

How to avoid it: Most things lose value over time, but usually, the rate is fastest when they’re new. Waiting a year is usually enough time to get long-lasting value — especially if a new version has come out since then.

7. Not saving for retirement while you can

Even if you’ve spent your whole working life without saving for retirement, it’s not too late to start. Don’t make the mistake of believing that Social Security will pay you enough to retire comfortably, or that Medicare will cover all of your medical bills.

How to avoid it: Many employers offer a matching 401(k) plan where your company makes contributions to your retirement when you do. Take advantage of this as early as possible and aim to get the full match. If you don’t, you’re basically throwing away free money.

8. Spending too much on too little

The little things — coffee, cigarettes, eating out— really do add up. Daily trips to Starbucks will cost you almost $766 a year, and that’s just for black coffee [2]. Americans go out for lunch on an average of two times a week, which adds up to nearly $1,000 a year [3].

How to avoid it: Brew your own coffee, pack your own lunch, and find free ways to give yourself a little pick-me-up. The temptation will be strong at first, but once you break the habit it’s easier. And the savings are immediate — every single time you resist, you save a few bucks.

9. Attempting to buy happiness

Speaking of free pick-me-ups…

It’s true that money can buy you things and sometimes, things can make you happy. It’s also true that an eternal quest for possessions can make you seriously unhappy. According to one study by the Worldwatch Institute, an advocacy group for “a sustainable world that meets human needs”[4]…

The failure of additional wealth and consumption to help people have satisfying lives may be the most eloquent argument for reevaluating our current approach to consumption.

How to avoid it: Usually it’s the things you’ve wanted for a long time that give lasting happiness, because you appreciate them more than impulse buys. But as cliche, as it sounds, the best things in life really are free. And if you concentrate on surrounding yourself with positive influences, rather than getting caught up in the consumerist rat race, you’ll live happier and longer [5].

10. Trying to change everything at once

Financial fitness is a lot like physical fitness — you can’t expect to bench your body weight on the first trip to the gym or run a marathon when you’ve sat on the couch four hours a day for the past year. Likewise, if you’re in debt and have bad habits, it’s going to take time to start thinking about money the right way.

Let’s say you read everything in this article and were immediately motivated to cut all extra spending, contribute to a 401(k), and start an emergency fund. No more stupid money mistakes. Then you see a sharp decrease in spending money, and instead of adjusting your lifestyle, which would be hard, you will probably stop your 401(k) and emergency savings contributions, which is easy.

How to avoid it: Start small, and start slow. Think of saving like losing weight: there is no lose-weight-quick or get-rich-quick solution that will last.

Even financial experts make money mistakes

John Rampton has one career that spans several jobs. He’s a financial expert who writes for national publications, speaks at national conventions, and invests in national companies [6].

Yet the point here isn’t to praise John Rampton, but to tell you his most embarrassing money mistake. Many years ago, he was broke — and it was his fault.

“I had a massive car payment, and I didn’t have a penny to my name,” he told Debt.com last month at FinCon, one of the many financial conferences where he’s a rock star [7]. “I was driving a brand new BMW, but I couldn’t afford the payments. I was living paycheck to paycheck.”

Eventually, he decided to do something about it.

“I swallowed my pride a little bit and sold my BMW X5,” Rampton says, with pain in his voice. “It was my brand-new pride and joy. I then took the money that I was making on the car payment, and I bought a used Ford Focus.”

While it was a solid financial move, it still hurt.

“It wasn’t beautiful,” he says. “It was missing two hubcaps and a gas cap. But two years, I was able to use the money I saved to pay off all my student debt.”

Debt.com spoke to other financial experts at FinCon and asked them to recount their worst money mistakes. Here are our five favorites…

Gerri Detweiler, credit expert: I have made more than a few financial mistakes in my life, I will confess. Some of them were more expensive than others but I think one of them was buying a bigger house than I needed. I have a small family. We bought a house out of foreclosure, so it seemed like a great deal, but it was a pretty big house. And so when I look back at all of the money we spent on home improvements and repairs and utility bills and cleaning bills, I probably should’ve had a smaller house. I solved that recently. We sold our 2,200 Sq. foot house and we now live in a 400 Sq. foot home. So, I downsized dramatically and I will tell you I don’t have to hire a cleaning person, my utility bills are like, a quarter of what they were and life is a lot simpler.

Rocky, 30AND0.com: My first experience with debt, like many others, I think was that I took on student loans. However, I was the first person in my family to go to college. So, I took on student loans so that for whatever reason wanted to be paid back within 60 days after my class ended. And at the time, I was making $5.15 an hour, so I did not have $2,500 to pay back the student loan. So, I started my adult life at 18 with a ruined credit because I couldn’t pay that loan back and I couldn’t make payments on it and it went dormant for quite some time until I joined the military and was able to pay it off. I just knew that getting in debt was not the smart thing to do. So, that kind of experience shaped me to get away from that very quickly and I think it’s very important that people realize how detrimental debt can be, because interest just doesn’t work in your favor when you’re investing. It works against you when you’re in debt.

Andrea Woroch, AndreaWoroch.com: When I was in college just toward the end, I got a credit card and I started racking up purchases, I went abroad, I went to Australia for a year, and started using that credit card so I could enjoy that year away. Unfortunately, that put me in a lot of debt and it took me many years to get out. That was the turning point when I realized that wasn’t the lifestyle that I wanted and that I needed to make a big change on how I viewed my everyday spending and what I wanted out of life.

Joe Saul-Sehy, Stacking Benjamins Podcast: I was a complete money screw up. It’s funny because I ended up as a PR representative at American Express and American Express Financial Advisors for 9 years. Before that, though, my first credit card that was taken away was an American Express card. Because in college after my family, who never talked about money, I went to college, went to our student union, signed up for a credit card. By the way, I’m at a military college, so I can’t make any money. I got my credit card, immediately took a bunch of my friends to lunch, bought myself a sweater (at a military-college; I can’t wear a sweater). Within 120 days, the credit card was gone and my credit was shot. But then through those hard knocks — and obviously through learning more about money — I became good enough at it to not only get my own situation taken care of but to counsel other people. I was a financial planner for 16 years.

Brandon Neth, FinanceBuzz.com: At 18 years old, I got this inheritance — I had no idea it was coming, $150,000. I got a ton of money and I had no financial literacy and I blew through it in four years. Not only did I blow through it, but I also managed to accumulate debt. I came out of college with a bunch of debt and made huge mistakes. So, luckily, luckily, I had met my wife in college and she was the exact opposite. One day, she just kicked me and said, “you’ve got to make these changes.” And I started making these changed a little at a time and decided to make these changes a little bit at a time. I decided to live this crazy frugal life. I discovered Mr. Money Mustache, The Mad Phoenix, and these guys that have just writing about it and just doing it. And I just jumped right in with everything I could. I changed my entire lifestyle: I FIRED at 33 years old. The only reason I work today is that I love it. So, I went from getting out of college at 22 years old with $30,000 in debt to 11 years later I FIRED and I don’t need to work. All it is is being online and putting in the time and effort. I’m not the smartest guy in the world, if you talk to me for five minutes you’ll know that. So, if I can do it, anybody can do it.

Moving past financial mistakes

We all experience financial regret at some point. It’s easy to get frustrated by financial missteps, but how do you put them into perspective and move on?

Marcia Reynolds, Psy. D. wrote an article about “5 Steps for Moving Forward in Spite of Regrets” for Psychology Today. In her article, she discusses how regret is often based on false comparison. If you are defining happiness by the stuff that you own or the size of your house, you may be setting yourself up for regret.

She notes that humans are bad at estimating what will bring them happiness in the future. We have only partial control over our circumstances and we make decisions based on past experiences. When life turns out different from what we expect, we blame ourselves.

She discusses 5 steps for dealing with regrets so that you can move on. Let’s look at her 5 steps in the context of financial regrets.

1. Accept your regrets as part of being alive

No one will make the perfect financial decision every time. My father used to tell me, “If you’re not making any mistakes, then you must not be doing anything.” You can’t always buy that car at the lowest possible price or get that mortgage at the lowest interest rate. Make the best decision that you can at the time. Life is about learning. Learn from your experience.

2. Don’t overemphasize what was bad about your choices

Don’t beat yourself up too much about a bad financial decision. Try to understand how you overpaid for that car or ran up all that credit card debt. You made that decision in the context of your circumstances at that particular time. Perhaps you got bad advice. Use your knowledge to avoid future mistakes and to share your hard earned wisdom with family and friends.

3. Claim today as the best you have with what you now know

Focus on the positive aspects of your present financial position. Appreciate the things that you already own or experiences that you have been able to afford. Look for opportunities to improve your financial future by enjoying what you have now and using what you’ve learned. Find simple ways to enjoy your life like visiting a friend, volunteering, reading a good book, taking a walk, or going to a museum.

4. Make time to reflect on what you are grateful

Give yourself credit for your financial successes. Be grateful for your possessions, your experiences, raising your children, and for the people that you have been able to help along the way. Take the time to thank the people who have helped you get where you are today.

5. If you are dwelling in regret, change something

Making even a small financial change can help overcome financial regret. Pay more than that minimum payment on your credit card. Start depositing a small part of your paycheck into a savings account. Small steps can lead to bigger steps. Maybe you can refinance that mortgage at a lower rate or start that retirement account.

Ms. Reynolds points out in her article that people regret what they “did not do” more than they regret “what they did.” Taking positive action, even a small one, can change your perspective and make you feel more empowered over your finances.

Everyone has regrets. What’s important is to learn from them and move on, so that you can enjoy a happier, healthier and more fulfilling life.

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Meet the Author

Jess Miller

Jess Miller

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Miller is the former assistant editor of Debt.com.

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