In Debt Management, Financial Planning, Investment, Personal Finance

There is no shortage of money tips out there. From ways to make more money or get out of debt, you have endless resources to help you on your financial journey. However, one of the best ways to set yourself up for financial success is to avoid making common money mistakes in the first place.

It is usually easier to bypass a financial mistake than correct one after one has been made. And financial mistakes are not equally weighted. A financial mistake in your twenties is likely less damaging than a financial misstep in your sixties. That being said, taking the unblemished (or gently blemished) financial path is a road worth striving for.

Here are thirteen money mistakes everyone should try to avoid on their path to financial independence.

  1. Not Having Emergency Cash Reserves

Nothing may be scarier than losing your source of income. That is why it is a mistake to not have emergency cash on hand. The rule of thumb is to have three to six months of your known expenses covered. Whether you need three months or six months depends on how long it could take you to secure other employment in the event you lose your job based on market demand for your skill set and availability of jobs in your geographic area.

  1. Being Uninsured or Underinsured

It is important to identify and evaluate your risk exposure including personal, property, and liability risk. Insurance is a tool that is used to lessen the financial impact of a catastrophic loss. When something bad happens like an accident, natural disaster, or untimely death, you’ll be glad you have adequate insurance coverage. Car, homeowners, and life insurance are the major insurances you want to carry (and have enough of). Not being insured properly can dramatically impact your financial future.

  1. Not Having a Will

A will is an estate planning tool that everyone should have who has any amount of assets or dependents. News headlines about celebrities who passed away without a will highlight the impossible complications families face when you don’t have your wishes documented in advance.

  1. Carrying Credit Card Debt or Other High-Interest Loans

Reaching financial success is sufficiently stalled when you carry a credit card balance and are paying north of 13% interest on purchases you made. If you do have credit card debt, work to pay it off as quickly as possible.

  1. Not Saving Enough

The earlier you save, the better. Therefore, not saving enough now because you prioritize saving last after you pay for your lifestyle is a scary financial mistake. It can impact your future lifestyle in retirement and even delay when and if you can retire.  Try to aim to save between 15% to 25% of your gross income toward retirement savings.

  1. Not Investing or Improper Investing

Make sure to participate in your employer-sponsored retirement savings plan. These are typically comprised of target-date mutual funds that are relatively safe and effective ways to build wealth for your retirement. If you are only invested in individual stocks or overly complicated investment products, this probably means you’re not investing with a plan and may compromise your financial well-being.

  1. Borrowing Against Your Future

Taking money away from your retirement, whether before it’s deposited into your retirement account or not, is a financial mistake with scary consequences. Remember, you can borrow money for pretty much anything EXCEPT retirement. There is no such thing as a retirement loan.

  1. Living Beyond Your Means

Spending more money that you make is never a good idea. Society makes us feel like we deserve things and shouldn’t deprive ourselves from having what we want. In reality, it’s always better to wait until you can legitimately afford it. Only then do you have total control over your money.

  1. Assuming Too Much Risk (or Too Little)

When you invest, make sure that you invest in accordance with your risk tolerance and risk capacity. The former is your stomach for risk – what you personally feel comfortable with. The latter is how much risk you can take without posing detrimental, irreversible harm to your financial well-being.

  1. Putting Your Children’s Education Ahead of Your Retirement

Love for your children is a powerful motivator, and of course, you want to do what you can to help them afford higher education. Just don’t do it at the expense of your retirement. Prioritize your retirement savings first and then saving toward your children’s education.

[RELATED CONTENT: How to Afford Your Child’s Education]

  1. Using a Home Equity Line of Credit

It’s rarely ever a good idea to use a home equity line of credit. In theory, it is a way to borrow against your equity to make improvements to your home and, in effect, increase your home equity even more (but not guaranteed). But, people can use home equity for any number of things since the loan is given as cash.

  1. Chasing Returns or the Next Big Thing

Chasing returns is a fast way to lose money. No one can predict the market and finding the next Amazon is anyone’s guess. This winds up becoming a risky sport that can lead to financially unsatisfying outcomes. Clearly defined investment objectives help to establish a disciplined systematic approach to investing in both good and bad financial markets.  

  1. Not Enjoying Your Money

The final scary money mistake you should avoid is not enjoying your money now while you can. I am not suggesting you go on a crazy spending spree. Instead, set your finances up in a way that allows you to cover your needs, save for your future, and have some leftover that is ear-marked specifically for fun. When you take control of your finances and reach financial independence, you create a path by which you can enjoy the life you so intentionally built.

[RELATED CONTENT: How You Can Enjoy Your Lifestyle and Save Toward Your Future]



Technology can be extremely helpful when it comes to managing your finances! That’s why the next FRANKly SPEAKING article covers the top 10 personal finance tech and apps that can help make your financial life easier.

As always, I invite you to reach out to me – in real life – with any comments, feedback, or questions!  [email protected]


Disclaimer: The information contained in this article is for informational purposes.  None of the information provided in this article is intended as investment, tax, accounting or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement of any company, security, fund, or other securities or non-securities offering. Please consult with your accountant, finance professional, and/or legal counsel regarding your specific circumstance. Reproduction of this material is prohibited without written permission from Frank Shields, and all rights are reserved. Read the full Disclaimer.

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