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Financial mistakes happen often, and earning lots of money or being born into a well-off family doesn’t guarantee you’ll be good with money. In fact, it’s often the opposite.
Take a look at Apple. When the company was created in 1976, it had three co-founders – Steve Jobs, Steve Wozniak, and Ronald Wayne.
Most people haven’t heard of Wayne because his tenure at the company was short. Worried about potential risks, he sold his 10% stake in Apple after just 12 days, receiving $2,300 in return.
As you may know, today Apple is worth over $3 trillion. Wayne’s decision is often cited as one of the worst money mistakes in the world.
Of course, there was no way Wayne could have predicted how big Apple would become.
The good news is that, in most cases, making smart money decisions doesn’t require hindsight. However, it requires effort and strong financial habits.
What are the most common money mistakes to avoid? How to get ahead financially?
As a finance expert, I’ve seen people struggle with borrowing, budgeting, and investing.
In this article, I’ll explain the top common financial mistakes and what you can do to turn them into good money habits.
This post is all about the most common financial mistakes to avoid in 2025.
6 Money Mistakes To Avoid Fast
1. Ignoring inflation
Having your money in a savings account may feel safe and cozy, but it’s actually losing value by 3% to 7% each year.
Whenever the economy is in a bad spot, most people tend to focus on immediate financial problems, such as market drops.
However, the reality is that inflation doesn’t simply disappear even when a recession is in full effect. Unfortunately, in many cases, it only gets worse.
In 2024, the U.S. inflation rate averaged around 3.4%, but some years, like 2022, saw inflation spike to over 9%, the highest level in four decades.
That means if you had $10,000 sitting in a bank account, its real-world purchasing power could shrink by hundreds of dollars in just a single year.
So, what can you do instead? Experts recommend keeping only about three to six months’ worth of living expenses in cash. The rest should be working for you, in inflation-resistant assets like:
- Stocks (historically averaging 7%+ returns after inflation)
- Gold (which often spikes during inflationary periods)
- Bitcoin (sometimes called ‘digital gold,’ though it remains volatile)
2. Paying off ‘good debt’ too early
Debt is a dirty word for a lot of people. The second they hear it, they sprint toward paying it off like their hair’s on fire.
But not all debt is bad! In some cases, it can actually work in your favor.
Take a low-interest mortgage or federal student loans as examples. Did you know the average 30-year mortgage rate was 3% in 2021, while the stock market returns around 7% after inflation?
That’s a big gap! So if you’re throwing every spare dollar at a cheap loan, you might be missing a golden opportunity to build real wealth.
The key takeaway? Don’t wipe out ‘good debt’ too fast. Instead, focus on growing your money. Invest what you can and let your debt work quietly in the background.
3. Putting all your eggs in one basket
Even if you’re new to investing, you’ve probably heard about the ‘Magnificent Seven’ tech stocks – Amazon, Alphabet, Apple, Microsoft, Meta, Tesla, and Nvidia.
Up until recently, they were considered the crown jewels of Wall Street. If you own one of these and it’s done well, that’s great! However, there are some risks to be aware of.
If a single stock makes up too large a portion of your portfolio, it could hurt your overall finances more than you’d like (in fact, recently, Nvidia shares plunged by 17%).
So, what can you do to avoid this? The simplest option is to sell part of your shares and diversify your portfolio.
However, this can be tricky because selling could mean paying capital gains tax, plus it’s scary to sell something that’s done really well.
Don’t panic yet! If you’re hesitant about making this decision, consider gradually reducing how much you have in one stock over time. This way, you’ll spread out the risk with much less worry.
4. Cosigning loans
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True love and friendships last forever… Until they don’t. It can be hard to say no to a loved one, but never, ever cosign someone else’s debt, even if you’re head over heels in love with them or they’re the most reliable person you know.
No ifs, ands, or buts.
By cosigning a loan, you become equally responsible, which means you’ll suffer the consequences if the main borrower misses their payments.
5. Having too much dependence on credit cards
Charge it! If this is your go-to phrase that you’ve committed to memory, it’s time to rethink.
For many people, using credit to pay for anything and everything has become a way of life. But it’s one of the worst money mistakes you can make!
Carelessly swiping your card for your daily latte or drinks after work can quickly become a dangerous habit that leads to all kinds of troubles, from debt to a poor credit score.
So, what should you do instead? Switch to a debit card or try to pay for most items with exact change. When making purchases, use money you currently have, not what you anticipate earning.
6. Not having a financial plan
Money is not a sexy topic – we get it. But if every time you think about budgeting your money, you want to bury your head in the sand, it may be because you don’t have a proper financial plan in place.
This is one of the biggest financial mistakes you can make. Without a plan, you’ll be reacting to issues instead of proactively managing them.
So take time to think about the following:
- Where do you want to be in the next few years? An important step in taking control of your finances is laying a foundation for a healthy money life.
- Is your plan realistic? Establish a budget and stick to it! Follow the One Number Strategy – take your monthly salary and subtract your fixed expenses and monthly contributions to your financial goals. Whatever is left, you can spend as you please.
- Do you have the right insurance? Are you setting money aside for an emergency?
Nowadays, there are many great budgeting apps available. Don’t be afraid to use them!
Final Thoughts: Common money mistakes to avoid
Everybody makes financial mistakes. The good news is that it’s never too late to start taking control of your finances (or, at least, ponder that 401k).
I hope this guide on money mistakes to avoid will give you an understanding of how to plan your finances better. After all, more money shouldn’t equal more problems.
Interested in learning more tips and tricks? Follow our blog for more guides and expert advice.
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