10 Most Common Money Mistakes People Make, According To A Financial Advisor
The Wealth Gang team writes about financial information, passive income ideas, apps, programs, cash management tools and other wealth gadgets that we think you might want to use or learn more about. Sometimes, we write about products, services or items that might be associated with affiliate partnerships. In these instances, we will earn a small percentage of the revenue from sales. There is, of course, no cost to you.
Thank you for all your support! Without you, we could not keep this site running. Gang Gang!
Money management and general personal finance isn’t taught in school. While financially smart actions like spending less than you earn and investing your money might seem obvious, so many people in the world lack financial literacy. And that is why so many people, from all walks of life, make so many money mistakes.
Perviously, we shared the biggest money mistakes that people over the age of 50 made in their 20s, 30s, and 40s, but today we stumbled upon a thread where financial advisors (and other people) discussed some common money mistakes that they see people make. One answer, which provided 10 very distinct mistakes, stood out among the rest.
10 Most Common Money Mistakes People Make
If you’re having financial struggles, personal finance issues, or a downright awful investment strategy, try to avoid some of the biggest money mistakes listed below.
We found these answers, which were provided by Doug Armey (a successful investor, financial consultant and entrepreneur) on Quora. They are so spot on we needed to share them.
1. Panic In Both Directions
Investor calls, “Sell before I lose it all.” He sells at the bottom. Three years later, “Buy before I completely miss out.” He buys at the top. A perfect formula. For going broke.
2. Magic Get Rich Quick Investments
People hear, “This investment will make you rich. Fast, easy, and guaranteed.” I tell them, “Pick two. Three is a magic black box. And only the guy selling the box gets rich.”
3. Lack Of Saving
“We needed the new boat and RV. Fun with the family, you know? Next year I’ll get serious about saving in my 401k.” Next year turns into retirement and then it’s, “What the hell happened?”
4. Too Conservative With Their Investments
“I just want to protect my principal. I don’t want to take any chances.” I reply, “Except after inflation and taxes your return will be negative. It’ll be steady though.”
“I remember when a bank C.D. paid me 7% and I couldn’t lose any money.” I respond, “Welcome to 80’s. That hasn’t existed for 30 years.”
6. Gambling On Risky Assets
“You can’t lose money on . . . It’s the future. You just don’t understand.” Fill in the blank with dot com stocks, gold, bitcoin, houses. I’ve watched them all skyrocket. And blow up.
7. History Will Not Repeat Itself
“But this time it’s different.” The famous last words of an investor just about to implode. Spoken in euphoria or panic. Same result.
8. Trying To Time The Market
“I’ll get out now. Then I’ll get back in when everything looks okay.” I respond, “So tell me what the world looks like on that perfect day. Otherwise it’s not strategy. It’s a fairy tale.”
9. Overly Optimistic
“Investing is easy. I can do it myself. I’ll learn as I go.” “Yep, you will learn as you go. Unless you run out of money first. It’s usually a lot cheaper to learn first or pay someone who has.”
10. Relentless Pessimism
“I’ll never be wealthy. My dad wasn’t. My brother isn’t. My friends aren’t.” I reply, “You can be. But no one has enough time to make all the damn mistakes himself.”
What Have We Learned?
If there is one takeaway from the list above it is that A LOT of people are very bad at money management. If there are two takeaways from the list above it is that that A LOT of people are very bad at money management and personal finance is not only personal, but it is emotional. If you look at the core of every mistake listed above, what all of them are lacking is logical thinking.
We often ask why smart people make money mistakes? The answer is likely two-fold. First, just because you are book smart, doesn’t mean you understand the basics of personal finance. After all, it’s not taught in school. And secondly, when emotions take over, even the smartest people can make poor financial decisions.
If you completely remove emotion from the equation, who can become wealthy? The answer is EVERYONE.
Obviously it’s impossible to be emotionless about something as important as money, but the key to controlling your emotions as it pertains to money is all about discipline, understanding that building wealth takes time, and consistently investing every month. How quickly you become a millionaire or your version of wealthy is up to you and your investment contributions and returns.
Current Top Offers
Invest in Commercial Real Estate With As Little As $10
Get a $50 bonus for creating and funding a new account
Invest spare change easily. Get $5 when you sign up for Acorns.
Earn an unlimited 1.5% back in Bitcoin on every purchase with the BlockFi Rewards Visa® Signature Credit Card.
Put your crypto to work. Get up to a $250 crypto bonus with a transfer of $100 or more in crypto.