5 Worst Financial Mistakes You Can Make

When you sit down to write out your budget or work on a long-term financial plan, you may be trying to make changes to your budget. There are some common money mistakes that people make when they are handling their finances. There are many big financial mistakes people make that end up hurting them in the long run, as well as financial blind spots that people don't even realize they're overlooking. But don't despair, because you can take steps to fix your mistakes. Learn from these mistakes so you will not make them in the future.

Save Money by Dropping Your Health Insurance

Person with their head on a desk with a budget in front of them

John Lund / Drew Kelly Blend Images / GettyImages

When you are looking to save money, you may want to drop your health insurance, especially when you look over the last year and realize that you did not go to the doctor at all or just once. It can be frustrating to send that monthly payment in or see how much it affects your take-home pay.

However, you never know what is going to happen. It may be a bad skiing accident where you blow out your knee, or a bad kidney stone that sends you to the emergency room in the middle of the night. You may fall on your way out to the car one morning and end up with a serious concussion and stitches. Health insurance has protected these people from walking out of the hospital with thirty thousand dollars or more in debt.

Suppose you want to lower the cost of your health insurance by switching to a high deductible health insurance plan and put away money into a health savings account (HSA) each month. This strategy lets you save money overall, and you cover the occasional doctor’s visit out of your HSA. It also protects you if that disaster does strike unexpectedly. You do not want to be fighting with the hospital when you need an emergency procedure done.

Figure Things Will Work Out Okay

It is naïve to think that things will just magically work out for you. If you do not come up with a solid plan to purchase a house and follow a budget, nothing will change. You will be in the same place or worse off next year at this time if you do not create a solid plan and follow a written budget each month.

It takes planning to move on to the next step. You need to prepare to do the things you want to do. Your budget is the way you can get control of your finances. It allows you to determine when and how you spend your money. It is important to realize that "budget" isn’t a bad word and that your financial plan will help you reach your goals.

Rely on Your Credit Cards to Get By

If you do this once or twice, you may be able to get out of debt pretty quickly, but if you make it a habit, you're going to wrack up a lot of debt in a short period, and you won't even have anything to show for it at the end of the year. Emergencies can come up unexpectedly, so you should save up an emergency fund so that you do not need to use your credit cards for emergencies. You need to make a goal to stop using credit cards completely for the next year. If you do use them, then pay them off in full at the end of each month. Using credit as a crutch is just one of the credit mistakes you can make.

Put Off Saving For Retirement Until …

You should be making regular contributions to retirement reserves. You do not want to put it off until you buy a home or are completely out of debt. You may not be contributing the full 15% that experts recommend you should work toward while you are trying to get out of debt, but you should still be making contributions now.

When you are in your twenties, you have a long way until retirement, and the more you contribute now, the more that money can help you. It is will have a longer period to grow and benefit you. You need to make sure you are making regular contributions to your retirement account. If you do not qualify for a 401(k), you need to set up an IRA.

Giving Into Pressure to Take the Next Big Step

So many of life’s milestones will affect your finances. When you decide to get married, move for a career change, buy a house, or start a family, you should be ready for the changes to your life. You are the only one who can decide when the time is right to make those decisions.

Your parents or friends may pressure you to make other decisions or to rush you into something before you are totally ready. If you are not ready yet, you may regret the choices that you made. Planning now for these events will make it easier when you are ready, but you should decide when that will be.