5 Money Mistakes to Avoid That I Have Made


I am not one of those personal finance writers who has always had their shit together. I’ve made more money mistakes than I can count, especially in my twenties. And if I’m being perfectly honest, I have still not recovered from these mistakes today (working on it though!) But because I have made so many mistakes in the past, I think I have a pretty good grasp on what not to do if you want to kick your financial journey into serious high-gear. So here are 5 money mistakes to avoid (that I made definitely made):

1.  Not Saving Early

The power of compounding is one of the true mathematical wonders of the world and a gift to all young investors.

If you put $10,000 in an index fund that gives an 8% return when you’re 40 years old and never made another contribution it will grow to $46,609 by the time you’re 60.

But if you took that same $10,000 and invested it when you’re 20? By the time you’re 60, it would have grown to $217,245!

Now suppose you added $500 every month in addition to the $10,000.

If you started at 40, you’d have $343,147. Not bad!

But if you started at 20 and added $500 every month? $1,895,931!

And that my friends is the power of saving early and often.

So what’s the best way to become a millionaire? Invest in low cost, low fee, low turnover index funds like Vanguard early and often. 

But suppose you are in your thirties (or even forties) starting fresh, what do you do? The answer is the same invest early and often! Every little bit helps, and thanks to the magic of compound interest, the best time to invest always today.

If you’re worried about whether now is a good time to invest in the stock market, read my article on market timing and go ahead and invest regardless of market conditions. The lesson is you can’t time the market.

Unfortunately, I made the mistake of not investing when I was younger. If you are young, don’t make the same money mistakes as I did and you will be well on your way to becoming a millionaire.

2. Spending Beyond My Means

Another mistake I’ve made in my life is spending beyond my means. In other words, I was spending more money than I was making.

You don’t have to be a finance Ph.D. to understand why this is a huge money mistake.

Where did I get this “extra” money? Credit cards of course!

This leads me to the third money mistake I made in my twenties:

3. Taking On Too Much Bad Debt

When you live above your means, you are often living on credit, swiping plastic in order to give you instant gratification. When it comes to money mistakes to avoid, this is a big one.

Don’t have the money to buy the new PS5? Put it on credit!

A lot of stores will let you open a store card with zero percent financing for the first six months or something. It sounds like a great way to get instant gratification. You think to yourself: I can pay that back no problem!

But then 3 months into your payments you have no emergency fund and your check engine light suddenly comes on. Oh shit. Now you can decide whether to continue paying for that shiny new widget you put on credit or driving to work tomorrow. Obviously, you’re going to spend it on the car, which now puts your ability to pay off that gadget in six months.

Six months arrives and suddenly you’re being hit with interest charges on the entire amount which now makes your several hundred dollar item 29% more expensive, depending on how bad your APR was you agreed to (but probably didn’t pay much attention to).

The lesson generalizes. Consumer debt like credit cards is bad. It’s perhaps the number one mistake I made in my twenties.

I remember at one point I was googling “average debt of Americans” to rationalize my holding debt, thinking to myself, “Oh, debt isn’t so bad! It’s normal! I’m A-OK.”

But I wasn’t OK.

My bad habits with credit cards in my twenties led to complete financial ruin.

Been there. Done that. I have had to slowly build back my financial health with a whole lot more discipline.

Yes, I know how tempting it is to blow $60 on an expensive DoorDash order because you had a shitty week at work and feel like you deserve it, even though you know in the back of your mind that you cannot really afford it and will have to float it on your credit cards.

The average American carries $6,800 of credit card debt.

That’s a whole lot of people with an invisible anchor weighing them down.

The average APR is around 16%. That works out to around $1100 going straight to the credit card companies every year. For people with bad credit that APR can easily be closer to 30% which equals $2200 dollars a year. And that’s just the average!

So speaking as someone who has “been there, done that” make it a habit to have “cash mindset.” This means only buy things if you know you can cover them with the money in your checking account. It doesn’t mean you shouldn’t use a credit card. It just means you should be paying off the balance in full every month.

So don’t make the same money mistakes I have.

4. Spending Money on Shit I Don’t Really Need

Part and parcel of not accumulating bad consumer debt is not spending money on shit you don’t need.

This is not the same as occasionally treating yourself because, hey, we all could use a little indulgence now and then.

But if you are financially struggling right now, it is almost certainly the case that you will have to sacrifice some amount of indulgence in order to get into better financial shape.

This is a money mistake that really boils down to your values. If you are perfectly happy being crushed by your debt or living paycheck to paycheck, then, by all means, continue with your current spending levels.

But unless you can significantly raise your income levels, there are almost certainly some things that you could cut out of your life and remain perfectly happy.

A classic example is bottled water. If you really value bottled water, go right ahead, I won’t judge you (this is a no-shame, no judgment blog). However, ask yourself if you’d be just as happy filling up a water bottle instead. If your tap water sucks, get a filter and it’ll eventually pay for itself if you’re a big h20 drinker.

That’s just one example. Now, obviously, what counts as “necessary” is relative to the person. To one person it might be absolutely necessary to have both a Netflix and a Hulu account. But to another person, they’re more of the reading type and are happy just watching YouTube or free video content (which there is plenty of).

This is one of the areas where personal finance really is personal. I’m not going to tell you what counts as unnecessary or necessary. That’s a personal decision. 

What I will tell you is that accelerating your financial journey often involves taking a serious look at your spending habits and making a hard distinction between “need” and “want.” Do you need to buy that book on Amazon? Or would you be happy getting it from the library?

In my twenties, I made this money mistake all the time and it really cost me. If I had taken all that money and invested it into index funds, I would be that much closer to achieving financial freedom.

5. Not Sticking to My Budget

Oh, budgets. Everyone loves budgets, right?


I must be weird then. Because I love budgeting! It’s seriously one of my favorite activities. There are not many other activities that give me such peace of mind.

However, I have definitely made the money mistake of making a budget and getting super into it only to not really stick to it two weeks later because I “must” have some unnecessary shit to provide myself instant gratification. 

I have been a long-time YNAB (You Need a Budget) user. And YNAB allows you to sync with your banks and can thus be used to track your every expense. But so often I have found myself using YNAB to track my expenses instead of guiding my expenses.

For example, if I put $50 in my monthly book budget and I spend it all but there’s a book I simply must have, I have been known to spend that money anyway and just either give up on using the budget or moving money around.

Now the YNAB philosophy does allow you to roll with the punches, But if I’m being honest with myself, buying one more book isn’t so much a punch as it is a desire for instant gratification, satisfying a want instead of a need.

I’ve been guilty of this money mistake more times than I can count.

So if you really want to see the power of budgeting in action, you need to learn to use budgets as a regulating guide in your life and not just a post-hoc expense tracker. Tracking your expenses and budgeting are two very different things!


So that’s it! 5 money mistakes to avoid. If you can focus on these things I promise you will be well on your way to financial freedom.

Related Links

Millennial Money Mistakes

10 Biggest Money Mistakes

7 Ways to Improve Your Money Management


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