Common Money Mistakes

According to CNBC experts, lack of planning and not having specific goals are the two most common mistakes in personal financial management.

Making money mistakes can be scary and seem like a disaster. Experts say some financial mistakes have the potential to change a person’s future. However, there are ways to prevent or avoid them. Two of the most common mistakes are not having a plan and not having specific goals.

James McManus, chief investment officer at online wealth management service Nutmeg, told CNBC that research shows that people who group their savings and investments into clear goals are more likely to stick with them. "You're more likely to maintain your savings or ride out short-term market fluctuations if that new home, dream trip or once-in-a-lifetime experience is clear in your mind," she said.

Having a clear financial plan and goals also helps to focus on the long term, which is important in personal finance management, according to Emma-Lou Montgomery, vice president of personal investing at Fidelity International. “The most common financial mistake is trying to ‘hit the jackpot’, predicting and reacting to market fluctuations. All of these can be avoided by taking a long-term view,” she added.

Another common mistake when investing, according to the expert, is taking an “all or nothing” approach. She notes that even small investments and basic knowledge can be enough to make us rich.

In addition, many common money mistakes involve losing or spending money instead of earning it. Myron Jobson, a senior personal finance analyst in the US, says paying off debts, such as rent and bills, should be a priority. Not having a "pocket" fund is a dangerous but common mistake.

“Holding cash gives you peace of mind if something goes wrong. This is money that will cover you if something goes wrong, your car breaks down or you lose your job,” he advises.

Prioritizing spending over saving is one of the most common mistakes in personal finance. Photo: CNBC — Prioritizing spending over saving is one of the most common mistakes in personal finance. Photo: *CNBC*

Many of these mistakes may only have short-term consequences. But experts say there's one that's often overlooked and can follow you for much of your life: poor retirement planning.

When you're young, retirement can seem like a far-off dream, and when faced with other immediate financial demands, retirement is often something we put off, according to McManus.

In fact, most people will eventually retire. At any age, we need to build a nest egg big enough to live in. So experts say that if you ignore retirement, you're doing yourself a disservice later on.

In addition to taking a close look at Social Security, everyone should put some money, even if it’s relatively small, into a personal retirement fund. Doing this when you’re young can be life-changing when you retire, experts say. It’s important to save and invest for retirement consistently and make sure to put more money aside as your income increases, Montgomery says.

After all, making money mistakes can feel overwhelming, experts say. But that's normal.

"When mistakes happen, the key is to learn and avoid making the same mistake. Whether it's overspending or forgetting to set aside some savings this month, don't beat yourself up too much," Montgomery advises.

Experts say mistakes can often be corrected. The important and fundamental thing is to take responsibility for your own finances.

Jobson suggests tracking your spending habits in a spreadsheet or using third-party budgeting tools. “Once you have a better understanding of how you spend your money, you can explore ways to optimize your personal finances,” he says.

Finally, learning and understanding more about your personal finances can also make a big difference. Knowledge is power, she says, and making sure you understand every aspect of your finances will help you prioritize and make informed decisions that support your big goals.

Xiao Gu (according to CNBC )

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