Money mistakes are something that we all wish we hadn’t made at some point in our lives. Unfortunately, learning from our own money mistakes can be costly and sometimes downright devastating. Even though I am a CFA and used to work in the finance industry, personal finance is not the domain I have specific training or skills to manage my own finance. I have my fair share of “mistakes” that took me several years to realize. Here are the 5 biggest money mistakes that I have made and hopefully, by reading this you can avoid making the same costly mistake.
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Not paying off your full balance on your credit card every month
This one is a classic mistake that a lot of people make. But especially for me, it could be super naive and stupid. When I was in my 20s, I had my first credit card and I went on using it with the ASSUMPTION that as long as I pay the minimum amount, I would be fine and I won’t have to pay interest. That is soo WRONG. By not paying off the FULL balance every month, I was actually allowing the interest to compound and I didn’t even bother to check how the balance was growing compounded.
What a terrible mistake!
Spending too much money on unnecessary things
I am definitely guilty of this one. When I was working my full-time job and then coming home too tired, I often found myself scrolling aimlessly on Facebook and indulging myself in impulsive shopping. Every month I would buy at least one or two new clothes, I wanted to feel good by buying more, and I ended up with more clothes than I could normally wear.
Turned out I had to give away so many clothes that I no longer felt interested too. Even though it was kinda helpful to help someone, it was definitely bad for my personal finance.
The cycle would continue if I still lived in Vietnam, I’m pretty sure of that.
Not investing early enough
This was another classic mistake that a lot of my friends, myself included, have made as well. Investing sounds somewhat intimidating for many people, so they tend to avoid it because they don’t know where to start. And when you procrastinate too long, the earlier advantages of compounding interest starts to dwindle.
I started investing seriously at 30ish, and I wished I had started way more earlier. One important reason was that previously when I was living in Vietnam, investing in our stock market (and emerging market) sounds more like a gamble than true investing. I know a lot of people have made big money from the market but more people are losing money from it in the long run. Therefore, in its true sense, this is not an actual mistake. (note that it is almost impossible for Vietnamese to invest in US market without a US bank account)
However, things change when I moved to Canada and I have access to the Canada and the US stock market- one of the best stock markets in the world. I feel more confident with the idea of putting my hard-earned money in top companies (of the US and the world), also I have better faith in the transparency of the market and the dynamic of the market as well.
Not contributing to, or even thinking about, retirement
When we are young, the last thing we want to think about is retirement, especially when we have plenty of time to save for it down the line. The thing is, the longer you wait, the more difficult it becomes to save for retirement. Not only do you have to save a larger chunk of your income each month, but you’ll also have to contend with years of lost investment growth.
I was too busy with other aspects of my life (raising my son, relocation, career growth etc.) that I barely took time to think about my retirement plan. It is understandable because when you have too much in your plate, you don’t have enough energy to think about your retirement in the next 40 days. The present is more important.
But as I move into my 30+, I realize that, if I don’t start thinking and planning for my retirement, no one is gonna do that for me. Not the government. Not my parents. Coming from a humble middle-class family taught me so well that I need to be self-sufficient and be on my own.
Once I came to that conclusion, I started to put money in my RRSP and unregistered account to invest for retirement. I think long-term. Investing is one of the best ways to grow your net worth and protect our assets from inflation.
Pay yourself first is the rule now I have learnt by heart!
Not being mindful of my spending
This is another mistake that I can proudly say that I am able to correct it. I was guilty of not paying attention to where my money is going each month, and as a result, a lot of my hard-earned cash was just flying out the window.
On the surface, it doesn’t seem like a big deal to not be mindful of your spending, but over time it can really add up. And if you’re constantly dipping into your savings or racking up credit card debt, then you’re only making things worse for yourself in the long run.
I’m becoming very aware of my spending by tracking it with my own Wealth Dashboard. Every week I will spend 5-10′ to log all of my activities into the sheet. Yes, only 10′ and no more than that. I lose 10′ but gain so much clarity on my personal finance situation. And because of this activity, I am able to look and reflect how each of my purchase is aligned with my value, does it add value to my life or it is just an impulse that drain the energy out of my life.
I can also see how my spending is fluctuating in comparison with the average budget that I have set for myself.
PRO TIP: if you are not sure how to start, or where to start, I suggest checking out my budget template that I created. You can find it by clicking HERE
Just like you, I made a lot of money mistakes along my journey, and It’s completely fine. We learned through trial and error. What matters is we won’t repeat the mistakes again. If you are guilty of making these same mistakes, then it is time to change your ways for good. Consider implementing one or more of the tips and tricks mentioned in order to help prevent future financial problems down the line. It all starts with awareness- so be mindful of your spending and saving habits, and you will be on the right track!
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Minh
Minh is a personal finance enthusiast, a CFA charter holder, and a Strategy consultant by profession. She loves to talk about everything personal finance-related. She wants people who read her blog posts to feel empowered and inspired in their journey to master their finances and towards financial independence, just like herself.
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