Personal finance

5 ways to keep from making these top common money mistakes

Sarah Wilson, of GoBudgetGirl, recommends looking for cheap or free alternatives before actually buying.

Source: Sarah Wilson

You’re not the only one with spending sorrows.

In recent years, some popular YouTube bloggers have started making videos confessing their biggest money mistakes, running the gamut from spending thousands of dollars on interior design for a rental apartment (“I didn’t do my research,” said Monica Church) to refusing to use public transportation (“I regret every dollar I spent on that temporary Hundai Accent,” said Chelsea Fagan).

These trending videos have struck a nerve with viewers, with hundreds of thousands of views, and more money-confession clips are posting all the time.

Even if you’re not a YouTube blogger or influencer yourself, you might still be regretting a $995 pair of fur-lined Gucci loafers or an underwhelming meal in Paris that still managed to set you back $400 — or maybe just an unused gym membership.

YouTube bloggers revisit their own spending mistakes regularly, says Sarah Wilson, a personal finance blogger who lives in College Station, Texas. “I did one four years ago on what I would have done differently with student loans.”

The patterns Wilson sees resurface frequently. “Impulse buys of any category are almost always [going to be] regrets,” she said. “When people take more time to think about how they’re going to spend their money they’re far less likely to wish they hadn’t spent it.”

There are different ways of feeling bad about a purchase, says Joseph Lum, a certified financial planner at Intersect Capital in San Ramon, California. Sometimes an item doesn’t live up to your expectations.

Purchasing something beyond your means can also be upsetting, if you’re still paying for it many months and many dollars later, thanks to interest charges.

The top thing you need to do is figure out exactly how much you can spend freely throughout a given month or year so you’re not affected negatively. That brings up the ugly “B word” — budgeting — which Lum says doesn’t work, due to its restrictive nature.

“It’s like diets,” he said. “The entire premise is that it’s built on restricting yourself.”

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Financial freedom is not a matter of attaining some magic number, like $100,000. “It’s the freedom to spend at your discretion because you’ve taken care of business,” Lum said. “You don’t have guilt.”

That ease with spending comes after you’ve worked out how to pay yourself first — saving for retirement, emergencies and so on. “Say there’s 20% left over,” Lum said. That’s yours to spend or splurge however you want.

In a more recent YouTube video, Wilson details misguided spending on shoes, luggage and cookware, and shares some commonsense strategies to avoid financial mistakes.

Habits first

Spending money doesn’t equal meeting goals. “It creates a false sense of accomplishment in your brain, when all you’ve done is spend money,” Wilson said.

Fitness trackers, gym membership and sports equipment can be useful, but only if you use them. Signing up for a $10 monthly gym membership may seem like a good, cheap way of getting closer to your health goals. If you don’t go, you are looking at $120 in wasted fees each year.

Reward yourself after accomplishing some milestones. “When you’ve worked out X number of times a week, then go ahead and get the Fabletics leggings,” Wilson said.

And before you buy that fancy lunchbox, form the habit of packing your lunch one or two times a week.

Try for no-cost

Unused gym memberships are estimated to cost Americans some $1.8 billion annually.

Before committing to months of payments, check your benefits package for any freebies, says Wilson, whose employer gives employees free classes at a local fitness club. “Your insurance may offer subsidies on gym equipment or memberships,” she said.

YouTube has free videos on anything from yoga and Zumba to any other fitness workout you can imagine, and there are thousands of them.

Instead of a FitBit or other fitness tracker, use the health app on your iPhone or install a free or low-cost app on an Android phone

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Test drive

Impulse spending can add up to $5,400 a year for the average person.

Mulling a switch from a purse to a backpack? Before making a serious investment, try a cheaper version first to see if you like it. “More expensive doesn’t always mean better,” Wilson said.” A mistake many YouTubers make: They default to the super high-quality, then realize it doesn’t necessarily work for them.”

Sometimes it’s right to go for quality from the start. “If you’re a cook and enjoy cooking, the [higher quality] is going to be the better choice,” Wilson said.

Pattern recognition

Many people struggle to recognize spending patterns. “For years, I purchased cheap shoes that fell apart immediately,” Wilson said. She similarly bought inexpensive cookware and then felt bad when it did not hold up.

Learn from your bad choices so you can stop repeating them. “It’s the definition of insanity,” Wilson said. “A big part of my journey is recognizing when I’ve done things stupidly and sharing them — both for accountability and to help other people not make the same mistakes.”

Have a plan

Decide what you want in the future. It could be a great vacation or to pay off debt.

Then, remember that goal. “You need a reason to say no to a purchase,” Lum said. “Otherwise, you’ll likely say yes.”

“It all comes back to being intentional with your money and having a clear idea of what your habits and your lifestyle are before spending the money,” Wilson said.

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