30 Money Mistakes You're Probably Making and How to Avoid Them

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COSTLY ERRORS

Oversights or a simple lack of foresight can scuttle your finances and leave you flailing for solutions. When Fidelity conducted a survey asking people about their financial resolutions, 74 percent said they were able to stick to them last year — but 58 percent said financial mistakes made along the way derailed progress toward overall goals. For those looking to avoid costly mistakes and keep more money in their pockets, here are a few financial pitfalls worth sidestepping.
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DINING OUT TOO MUCH

According to the Bureau of Labor Statistics, the average American consumer spent nearly $3,400 a year dining out — a figure that just continues to rise annually. Worse, 28 percent of those surveyed by Fidelity landed on the high side of that average and let their love of dining out deter their financial plans. There are ways to save money when dining out, but the real answer is to eat in more often.
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NOT RETURNING OR EXCHANGING UNWANTED PURCHASES

Roughly 18 percent percent of people surveyed by Fidelity didn't return or exchange a purchase that wasn't quite right. Ecommerce platform Narvar notes that 83 percent of the people it surveyed who didn't return an item were put off by restocking fees, 74 percent didn't want to pay return shipping, and 51 percent didn't like the short time limit on returns. But considering that 57 percent of those who make a return replace the item at the same retailer or elsewhere, and that 60 percent get their money back, it's worth making an effort.
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TAKING A VACATION YOU CAN'T AFFORD

About a quarter of Americans can't afford a summer vacation, and roughly 33 million of them (around 10 percent) can't travel during the winter holidays because they are cash-strapped. But it's the 5 percent of those surveyed by Fidelity who take vacations they can't afford who aren't helping their savings or investments in the least. Try a staycation, or remember that you can find cheap weekend trips whether it's warm out or on the chillier side.
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PAYING TOO MUCH IN BANKING FEES

The average monthly maintenance fee for a bank account is an all-time-high $13.51. Overdraft protection fees still stand at $32.75. Checking account fees cost consumers an average $1,000 a year. For the 18 percent of consumers who tell Fidelity they're paying too much in fees, disentangling their financial institutions and fees is a task worth undertaking.
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PAYING FOR SUBSCRIPTIONS YOU DON'T USE

Apps such as Truebill and Trim exist because consumers have subscriptions that need watching. Waterstone Management Group found that 84 percent of Americans underestimate their tech spending: Though they guess they spend $80 a month, their actual bill is 40 percent higher at $112. Including internet and wireless services to use those subscriptions, the bill comes out to more than $237 monthly. Little wonder 18 percent of all consumers told Fidelity subscriptions were among their biggest mistakes.
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MAKING ILL-TIMED SPLURGES

Maybe they're going into steep holiday debt just before the tax bill is due. Maybe they're spending on concert tickets, steak, and wine just as it's time to renew their auto insurance. But 19 percent of consumers tell Fidelity they're spending at just the wrong time and setting back their finances as a result. Get on a budget — there are a ton of programs out there that can help.
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OVERSPENDING IN GENERAL

A Charles Schwab survey found a full 64 percent of people in a 2018 survey wished they'd spent less and saved more for retirement. (Too bad millennials are making the same mistakes.) Fidelity says most people can get a handle on overspending with a 50/15/5 rule in which 50 percent of take-home pay is for necessities, 15 percent goes to retirement savings (between your and employer contributions), and 5 percent goes into savings for unexpected and one-off expenses such as emergency travel or new appliances.
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OVERSPENDING ON GIFTS

Plenty of otherwise perfectly frugal people lose their senses around the holidays or overspend on a friend's wedding — sometimes buying out of stress, excitement, or sadness. Roughly 51 percent of Americans say they overspend on holiday gifts, and they already plan to spend plenty: an average of $1,007 during the past holiday season, which was $40 more than the previous year. If you aren't good at setting a budget or just get too wrapped up in emotional spending, you may want to pop onto Pinterest and start making gifts yourself.
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GOING HOUSE POOR

Nearly 12 million U.S. households spend more than half their income on rent. Fidelity's rule of thumb is to avoid spending more than 30 percent of pretax income on housing, but that doesn't work for everyone — there's a reason nearly 1 in 3 people between the ages of 18 and 34 lived with their parents in 2015, according to the Census Bureau. Parents can help to a point, but roommates, downsizing, and other solutions may have to come into play.
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CARRYING A CREDIT CARD BALANCE

No, carrying a credit card balance doesn't help credit. Credit-to-debt ratio is a big part of a FICO score, and it's actually best not to carry a balance. Card issuers are more likely to lower your interest rate if you have a history of on-time payments, and some will actually waive late fees once or twice a year — but you have to ask. If you want to get on top of it, either ask for a lower rate or switch to a zero percent balance-transfer card and pay down your debt.
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NEGLECTING RETIREMENT

Long-term investments can seem far less important when you're struggling in the short-term. But every little bit helps, especially when you have the power of compounding interest on your side. Fidelity suggests saving at least 15 percent of your income each year for retirement in a tax-advantaged account such as an IRA or 401(k) — and suggests including matching funds from employers. "Americans are living longer than ever, with retirement often lasting 35-plus years," says Scott Goldberg, president of Bankers Life. "You could need expensive medical care for months or even years, drastically cutting into your hard-earned retirement funds."
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PLAYING IT TOO SAFE IN THE LONG TERM

The financial crisis has made many young investors overly cautious, Fidelity notes, and an overly conservative approach to investing could stifle investment portfolio stocks, which tend to outperform bonds over the long run — by a lot. If you're saving for retirement and won't touch your money for 40 or 50 years, what happens in the market this month or this year is much less important than what will happen during the next few decades.
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LETTING EMOTION UNDERMINE INVESTMENT DECISIONS

Fear can hinder investment success. So can enthusiasm. "Letting emotion drive your investment decisions is the best way to wind up running afoul of a bubble or missing out on appreciation," Meerman says. Instead of trying to time the market, or falling for a opportunity that was literally too good to be true, investors should decide on a long-term asset allocation, and resolve to stick to that plan through good times and bad.
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NOT HAVING A WILL

While the Tax Cuts and Jobs Act of 2017 trims the number of people who'll have to worry about a federal estate tax, a will or trust is the only way to make your intentions known after you die. They're especially important for parents of minor children, who need to name a guardian for their child. "No one enjoys dwelling on his or her own mortality, which means that it's very common to procrastinate creating or updating a will," says Eric Meermann, vice president of Palisades Hudson Financial Group in Stamford, Connecticut. There's no getting around the need for some tough talks and paperwork, but there are ways to keep it simple.
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LACKING INSURANCE, OR LACKING ENOUGH

Going without car insurance will cost you for lapsed coverage, but it'll also cost you in fines from several states. A homeowner without homeowners' insurance is on the hook for damages, mortgage violations, personal injuries on their property and even dog bites. The population of those without medical insurance keeps climbing as the Affordable Care Act is whittled away, but uninsured families pay more total medical costs out of pocket than insured families and are more likely to have high medical expenses relative to income, according to the National Institute of Health. Perhaps it will help to know what insurance you don't need.
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NOT HAVING AN EMERGENCY FUND

Half of those who responded to a New Year's survey by Fidelity say unexpected expenses top their list of financial concerns, followed closely by rising health care costs (47 percent). Prioritizing saving and investing can help fend off a worst-case scenario. "Investors are protective about the financial progress they've made. They don't want to be caught blindsided by factors beyond their control — whether it's an ill-timed pullback in the market, an emergency home repair, or unexpected health event," says Ken Hevert, senior vice president of retirement and income solutions at Fidelity Investments.
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OVER-RELIANCE ON BENEFIT PROGRAMS

Only one-third of non-retired boomers expects guaranteed post-employment income from an employer, Goldberg notes. But programs such as Social Security are not designed to fully replace wages in retirement, nor will Medicare always pay for ongoing long-term care costs. Goldberg suggest workers consider annuities as a retirement solution and recommends buying insurance geared toward long-term care. "Beyond annuities, consider delaying your Social Security benefits until at least your 'full retirement age' or longer, as that can result in a higher income check from Social Security," Goldberg says.
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NOT PAYING DOWN DEBT

If you're going to retire, you have to expect a significant decrease in income. Debt payments should make up no more than 10 percent, Goldberg says. "Remaining medical, mortgage, or education-related debt can prevent retirees from living the life they have imagined," he says. Either workers or their financial advisers should work to build assets and pare down debt as early as possible.
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NOT TAKING REQUIRED MINIMUM DISTRIBUTIONS

Certain retirement funds, including IRAs and 401(k)s, force retirees to take a required minimum distribution halfway through age 70. While they are typically required to take their annual RMD by Dec. 31, the first withdrawal can be postponed until April 1 of the next year, though they will be required to take two RMDs that year and deal with the tax consequences. According to Joe Gaynor, director of retirement and income solutions at Fidelity Investments, about half of Fidelity clients sign up for automatic withdrawal services to simplify their RMDs. "The penalty is huge — it's 50 percent of the amount you don't withdraw — so if someone's RMD is $10,000 and they don't take anything, the penalty is $5,000," Gaynor says.
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SPENDING FOR REWARDS

According to CreditCards.com, 47 million Americans picked up a tab just to earn credit card rewards. If a $100 dinner with friends puts you over the minimum spending for a 50,000-point sign-up bonus on a rewards card, that may be worth it. But if you have a credit card with a quarterly 5 percent cash back bonus on restaurant spending, a $100 restaurant tab for yourself and four other people will earn back just $5. If no one pays you back, you might pay $95 for a meal instead of $15. You can rack up a lot of rewards buying groceries or gas and immediately repaying your balance, but just don't think you're breaking even.
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NOT HAGGLING

Just 10 percent of shoppers negotiate the prices of items they buy all the time, CreditDonkey says — while nearly a third of the 30 percent never haggle, and a quarter rarely haggle. That's a shame, as folks who haggle over electronics online, such as through a website chat box, save $94 each time on average, according to Consumer Reports.
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HAVING ONLY ONE JOB

While the Bureau of Labor Statistics says only about 5 percent of Americans hold more than one job, that's considered a gross underestimate. It also doesn't mean that more people shouldn't take on extra work, as the extra income and added job security come in handy.
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FALLING BEHIND ON PAYMENTS

Among credit card holders, about 60 percent of those who missed a payment did so simply because they forget. Not only does a late payment typically cost you a fee, but a late payment on credit cards, utilities, rent, or your mortgage can knock up to 100 points off your credit score, hiking interest rates and making everything more expensive as a result. There's a no-brainer solution: Automate your payments.
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USING CREDIT CARDS FOR EVERYDAY EXPENSES

People tend to spend more when they pay with a credit card instead of cash, getting saddled with debt forcing them to pay even more in interest. Do yourself a favor and either pay with cash or debit cards or buy only what you can cover in a month.
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BORROW MONEY FROM FRIENDS AND FAMILY

Americans lend $288 billion each year to friends and family, with the average loan totaling $3,239. Unfortunately, that might add up to $184 billion in annual debt. It doesn't come with the interest or credit implications of a typical loan, but just 49 percent of people ever pay back the full amount. If you lend money to family, you may never get it back.
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QUITTING YOUR JOB WITHOUT A PLAN

Just 22 million workers quit their jobs in 2010, but roughly 60 percent of workers quit or intended to quit their jobs at the end of last year. But if you're going in without a plan, you aren't shoring up your finances, you aren't making alternate arrangements, and you're setting yourself up for a worse existence than the one you're living. Think it through.
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STAY AT A DEAD END JOB

Staying at a dead-end job with no hope for advancement doesn't help either, though. If you're putting a lid on your earnings while preventing yourself from getting another more upwardly mobile gig, it might be time to start making financial preparations and looking around for other work.
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NOT SETTING A BUDGET

Consumers who set a budget improve their mental health and well-being. Roughly 62 percent of budgeters "feel more in control" over their money, 55 percent felt more confident, and 52 percent felt more secure, according to a survey by the Certified Financial Planner Board of Standards. Roughly 70 percent of people have a budget, and 72 percent of those who do say it helped them get out of debt.
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NEVER SETTING FINANCIAL GOALS

You can have goals without a plan, but not having a goal at all is dangerous. Only about a quarter of Americans have specific savings goals — which is likely why only 17 percent of those without goals think they'll achieve them, Charles Schwab finds.
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NEGLECTING TO SET UP A FINANCIAL PLAN

Even when people have long-term financial goals, 37 percent are not confident they are taking the necessary steps to meet them, according to a survey from the Center for Financial Services Innovation funded in part by AARP. "When we look at the top 10 percentile of overall performers in our Modern Wealth Index, there's a consistent theme that they're diligent planners — three in four say they have a written financial plan," says Terri Kallsen, executive vice president and head of Schwab Investor Services.

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