3 Common Financial Mistakes to Avoid

When you hear the word “finances,” do you get excited? If your answer was no, don’t feel bad. This response often comes from knowing we have messed up in the past or not understanding how to make wise financial decisions for the future, but you are not alone. Financial mistakes are made by people of all ages. Three common mistakes according to Ron Blue include living a consumptive lifestyle, not having a budget, and cycling through automobiles; all of these often causing individuals to spend more than they make.

The biggest financial mistake that people make is choosing to live a consumptive lifestyle. This simply means that an individual is spending more than they should, given their income, goals, and priorities. It is extremely easy to fall victim to this lifestyle in this day and age in America, especially with the huge usage of credit cards and countless ways to take out loans. As Americans, we are always hearing people say, “enjoy it now”, “you only go around once”, “live it up”, and “you owe it to yourself”. It is easy to compare ourselves to others via television or social media, and thus live a more consumptive lifestyle. Because our culture encourages this consumptive lifestyle, it is important for us to ask ourselves, “How much is enough?”

Not having a budget set in stone is the second common financial mistake. This also includes people who create a budget, but do not follow through with it. Without a budget, humans tend to live life as a responder. An example of this is a person who claims to save tons of money by buying things that are on sale, even though they are not needed. I admit, having and using a budget can be distasteful because the feeling of being limited to what we can and can’t have is not always enjoyable. But, similar to a GPS, a budget helps guide a person and tells them if they are on track to reaching their short- or long-term goals. A budget simply prevents you from spending responsively, impulsively, and unwisely. And just like the GPS, it may take us a little extra effort to type in the desired location and follow the instructions, but the guidance helps us save much frustration in getting to our desired destination. If we just started driving without a good idea of where we were going, we most likely would not end up at our desired destination at the end of the day, and we would be very frustrated. Not using a budget works the same way.

The last common financial mistake has to do with the frequency of buying and selling automobiles. In our society, there is quite a bit of pride and ego associated with a person’s vehicle. A quote in the newspaper states, “Logic and automobile purchases do not go hand in hand.” When selecting a new car, most people overlook many important pieces of information like the cost of repairs, license cost, financing cost, opportunity cost of the cash paid out, insurance cost, and even depreciation. After Dr. Ron Blue finished researching which car should be his next, he came to the conclusion that the car he currently has is by far the cheapest he could own. Even though it needed a few repairs and had miserable gas mileage, the old car was still cheaper than what it would cost for all of the fees that come with purchasing a new one. Two conclusions can be made by this; one being that the cheapest car anyone can ever own is the one they currently have, and the longer that a car is driven, the cheaper it costs to operate.

These are just a few of the many common financial mistakes that people struggle with in today’s society. If you would like to dive deeper into these topics, please check out Master Your Money written by Ron Blue or schedule an appoint through the NEXUS Financial Discipleship Center.