Let’s face the truth, money is hard to understand and it is one of the most interesting relationships we will ever have in our lives. Some people are really good with money and they know how to use it, others are trying to make sense of it but they mess up along the way and do stupid things with their money.
I have been guilty of some of these things, but it’s good to know these mistakes so you can correct them and not allow them to continue. Let’s dive deep into the stupid things people do with money and learn how to avoid them.
Not knowing where their money is going
The first stupid thing people do with money is not having a sense of where their money is being spent.
When was the last time that you tracked your expenses? This is one of the dumbs things people do with money because they probably don’t know how to track their expenses or they simply don’t have the time.
When you spend with no sense of direction, this can lead to debt, unpaid bills and a messy credit score.
The best way to avoid this money mistake is to set up a budget today and start tracking your finances.
Trust me, it will change your life.
Keeping Funds in a Non-interest bearing account
Another money mistake people make, especially those who are not aware of the various types of accounts that exist.
It can also be an honest mistake because it is oftentimes overlooked and one might actually think they are earning interest when in actuality, that is not the case.
A checking account is not a savings account, instead, it’s an account used for day-to-day transactions such as paying bills and is usually attached to your debit card.
A chequing account is an account that does not earn you any interest, so if you are trying to save, this is not the account for you.
Instead, get a high interest savings account and start saving money there. Only use your checking for day-to-day business, actually save money in an account with an interest rate attached to it.
Not Capitalizing on Employer Benefits
This is another stupid thing people do with their money, particularly those who are new to the workforce largely due to lack of knowledge or awareness.
It might be shocking to know that many people do not tap into their employer benefits.
Some of these include 401K match in the USA or RRSP match in Canada where you can save money and your company will match up to a certain amount. This is basically free money that people are leaving on the table.
Other benefits include corporate discounts on car purchases, flights, hotels, and a host of other services designed to help you save money.
Some employers even offer student loan repayment support, tuition reimbursem*nt and personal finance support.
If you are not using these benefits, reach out to your HR Department and find out about what is available to you and start using them right away.
Using a high-interest credit card
Credit cards can be a blessing but if poorly managed, they can lead you into serious debt that is hard to get out of.
I must admit, I have been guilty of this mistake myself, falling into credit card debt which was sobering to come to terms with.
This money mistake is a tough one because most people sign up for credit cards without a clue of what the interest rate actually is. Credit card interest rates are usually double-digits with rates as high as 23%!
This can lead to very expensive debt and if you continue to spend with no plan on how to pay off your credit cards, it can easily become unmanageable.
Before you sign up for a credit card, whether it’s a bank credit card or a retail credit card (that is hastily pitched to you at the check-out line), always inquire about the interest rate.
Always ask about the benefits that come with the card. Is it a cash-back card, does it offer travel/reward points? Does it have an annual fee?
Ask these questions first and then decide if the benefits outweigh the cost and then determine if it’s right for you.
Missing Credit Card Payments
Credit cards are back on the list as they are simply the easiest ways for us to do stupid things with our money.
The reason for this is that we are not educated on how to properly use a credit card and enjoy its benefits instead of allowing it to ruin our finances.
One way in which you can ruin not only your finances but also your credit score is by missing a credit card payment.
Let’s face it, depending on your financial situation, it might not be easy to pay off your card each month, but it is VERY important that you pay something.
Always make the minimum payment and do not miss the payment as it can signal that you are irresponsible with credit and credit bureaus will note this on your credit report.
This can lead you down a path of a bottomless pit where your credit score gets worse and you are unable to get good interest rates when you want to purchase a house or car or anything else.
Never miss a payment, always pay either the minimum or if possible, pay off your credit card bill every month.
One trick to ensure you don’t fall in the credit card trap is to have a limit on how much you will use your credit card each month.
This puts a safeguard in place to protect you from overspending and will enable you to pay off your credit card each month – which is pretty good for your credit score as well.
How do you stop being dumb with money?
Everyone makes stupid money mistakes and it’s ok as we are all a work in progress so don’t spend time feeling guilty and being ashamed.
Instead, focus on your future and educate yourself through financial literacy and take the necessary steps to get right with your money.
These mistakes can cause heartache and sometimes financial ruin but life is an on-going cycle of ups and downs and nobody has it all figured out.
Take one step at a time, follow the advice in this article and keep going. We have lots of resources to help you on your financial journey and together we will build wealth and live abundantly.
Grab your FREE Money Guide that will get you on track or your 90 Day Money Action Plan. Apply these practical steps and you will see your financial life improve.
What other money mistakes have you made? How did you deal with it?
