Managing finances can often feel overwhelming, but avoiding common money mistakes can make a significant difference in your financial health. That’s why Bret and I recorded an episode of The Chalene Show to answer questions about money, investing, getting out of debt, and whether you should buy a house or keep renting. We cover how to get started, the best apps to use, which stocks to invest in, and the first steps to take if you’re trying to get out of debt.
Bret is not a financial advisor, so this episode and blog post is for entertainment purposes only!
Have We All Been Brainwashed About Homeownership?
Let’s start by addressing one of the biggest myths: that homeownership is the ultimate measure of success. Many people have been conditioned to believe that owning a home is a financial milestone they must achieve. However, buying a house isn’t always the best decision for everyone. Sometimes, renting can offer more flexibility and financial freedom, especially if you’re not ready for the long-term commitment and expenses that come with homeownership.
Action Step: Evaluate your current financial situation and future goals. Don’t rush into homeownership just because it’s seen as a societal milestone. Renting might be a better option for you at this stage of your life.
Getting Started with Budgeting
One of the most common mistakes is not having a budget. A budget helps you track your income and expenses, ensuring that you’re not overspending. Knowing where your money is going each month is crucial. Create a simple budget that outlines your fixed expenses, like rent and utilities, and variable expenses, such as groceries and entertainment. This will give you a clear picture of your financial health and help you make informed decisions.
Action Step: Start by listing all your monthly income sources and expenses. Use apps or tools like Wealthfront to help you manage and track your budget efficiently.
Building an Emergency Fund
Not having an emergency fund is another critical mistake. Life is unpredictable, and having a financial cushion can prevent you from going into debt when unexpected expenses arise. Aim to save at least three to six months’ worth of living expenses in an easily accessible account.
Action Step: Set up automatic transfers from your checking account to your savings account to build your emergency fund gradually. Consider using platforms like Sofi for competitive savings rates.
Tackling Debt
Debt can quickly spiral out of control if not managed properly. Ignoring debt or only paying the minimum amount due can lead to high-interest costs and prolonged financial stress. Prioritize paying off high-interest debt first while making minimum payments on other debts to avoid accumulating more interest.
Action Step: Create a debt repayment plan. Focus on paying off high-interest debt first while making minimum payments on other debts. Use resources like Etrade to manage and consolidate your debts effectively.
Investing for the Future
Many people fail to invest for their future, missing out on opportunities to grow their wealth. Investing can help secure your financial future by providing growth potential that savings accounts alone cannot offer. Whether it’s through a 401(k), IRA, or other investment accounts, it’s important to start investing early and consistently.
Action Step: Research different investment options and start with small, regular contributions. Platforms like DataRoma can provide valuable insights and help you make informed investment decisions.
Prioritizing Retirement Savings
Underestimating the amount needed for retirement is a common mistake. Start saving for retirement as early as possible to take advantage of compound interest. Contribute to your employer’s retirement plan, especially if they offer a match, and consider opening an IRA for additional savings.
Action Step: Review your retirement savings plan and increase your contributions if possible. Use online calculators to estimate how much you need to save to reach your retirement goals.
Conclusion: Money Mistakes
Avoiding these common money mistakes can significantly improve your financial health and set you up for a secure future. By budgeting, saving for emergencies, managing debt, investing, and planning for retirement, you can take control of your finances and achieve your financial goals.
For more detailed guidance, check out Bret’s course Money Matters 101. It offers comprehensive strategies to help you manage your money effectively.
If you have any financial questions, feel free to DM Bret on Instagram at @bretjohnson11.
By taking proactive steps and avoiding these financial pitfalls, you can build a solid foundation for a prosperous future.
