4 common personal financial mistakes to avoid

We’ve all made at least a few financial mistakes in our lives. Some have greater ramifications than others, but one thing is for sure, we learn from these errors.

To save yourself time and frustration, here are four personal finance mistakes to avoid.

1. Overspending on Frivolous Items

You may not think twice about buying that mocha latte every morning, or grabbing an extra snack from the break room vending machine a few times a week. But every dollar you spend adds up over time.

Spending just $25 a week on dining out will cost you $1,300 each year. That’s money that could be put towards your mortgage or car loan to pay them off quicker.

If you’re facing financial hardship, this is one particularly important mistake to avoid. If you’re already living paycheck to paycheck, the last thing you should be doing is spending money on things that you don’t really need.

Cooking your own food and bringing your own coffee to work can easily save you more than $1,000 per year.

2. Using Credit Card for Everything

It’s not uncommon for people to use credit cards to pay for everything, from gas to groceries. But living on borrowed money will leave you paying significantly more for these items because of interest.

Unless you can pay for these purchases in full once you receive the bill, you should avoid charging these expenses unless it’s an absolute emergency.

3. Stretching Your Finances to Buy a Home

Buying a home can be a great investment, but it’s important to make sure that you can truly afford it.

“Although there is the potential for any home to increase in value, a house is no different from any other investment,” says Scott Langdon from MoneyTaskForce. “The value of the property can also decrease. The issue is when you do not have enough money to maintain your home, you are literally risking the roof over your head.”

Choose a home that fits your budget and lifestyle. Bigger isn’t necessarily better, and saddling yourself with a big, expensive home that you can’t really afford will only add undue stress to your life.

4. Living Above Your Means

According to the Federal Reserve, the U.S. household savings rate was just 3.1% in 2018. The problem can easily become a disaster if an emergency strikes. Many people are just a paycheck away from being homeless.

Overspending and trying to keep up with the Joneses is a big part of the problem. Pare down your lifestyle to match your income.