Everyone makes mistakes handling money, that’s just human nature. The trick to being wealthy is not avoiding mistakes because, unless you have a robot managing all your money, you can’t do that. If you want to be rich you have to avoid the big mistakes in personal finance that keep most people mired in economic mediocrity.
We have previously discussed the major financial mistakes people tend to make like buying too much house and co-signing loans for relatives. And yet the biggest and certainly the most common financial mistakes aren’t always the most obvious. The biggest mistakes people make with money span across age groups and are common to renters and those who bought a home. As one of those people who tries to encourage people toward a better way in finances, sometimes I want to bang my head on the desk. It’s very frustrating to watch people make the same mistakes over and over. Here are some of the money pits where people are losing a fortune a little bit at a time.
This is the number one money waster across generations. Baby Boomers, Gen X and Millennials all share this as the number one impact on personal finances. Interestingly, the percentage of waste increases with declining age. This makes sense as eating out is a more important social activity for younger people. The question you have to ask yourself is whether eating out is more important than being financially independent? Most people would objectively get the right answer to that question but, on a day to day basis, they’re giving away a small fortune to restaurants.
While the older generation is slightly better and reducing food waste than Gen X or Millennials, it’s still near the top on every generational list of money wasters. In that regard then eating out while letting food at home go to waste is sort of a double hit. A cooking class will set you back anywhere from $50 to $150, depending on the market. High quality cookware is expensive but the good stuff is really worth it. If cooking lessons and quality cookware will make eating at home more fun and wean you away from eating out, then it’s a good investment. Forming a cooking club, where you rotate between a number of friends with culinary interests, is a great way to cut down on eating out while maintaining the social aspects of good food.
Credit Card Interest
This one really grinds my gears and what makes it especially frustrating is to read people doing the marketing for credit card companies by bragging about cash back refunds. Cash back bragging is the same as casinos posting pictures of big winners; for every winner there is a long trail of losers. Credit card interest is a money waster that is common to all three current generations and the lures that catch those suckers are airline miles and cash back promotions. Debt service is like a silent tax on your budget. You don’t notice it because it’s rolled into your credit card payment. Too many people are paying that tax to big banks without a second thought.
Cell Phone Bills
This another surprise entry that’s common across generational lines. The main culprit seems to be overpaying for data plans and then not using much data. Now you can buy a big data plan but get a refund for unused data with a cell service from Google, called Google Fi. I’ve used it for months now and, not only is service excellent, but with my unused data rebates, my bill has been averaging around $25 a month. That’s because Google Fi only charges you for data you use when roaming away from WiFi service. Were I to use all my data, my bill would rise to $40 a month. That’s month to month, no contract. Previously my wife and I paid $90 a month for 1 GB of 4G data and unlimited 3G data. With Google Fi we’ll be able to reduce our average phone bill from $90 a month to less than $50 and we have nicer phones.
While the big mistakes can hurt, they’re usually easier to see coming. It’s the drip, drip, drip of wasteful spending that will cause you to wake up one day and realize that you don’t have enough stashed away for retirement.