11 Money Mistakes That Can Impact Your Emotional Well-Being, and How to Avoid Them
Managing money can be overwhelming and confusing, and everyone’s situation is different. Through no fault of their own, some people may need to pay attention to their bank accounts to ensure that they can afford essential things, while others may not think twice about what they’re buying.
How you manage money can also be influenced by how you grew up and saw your loved ones handle money. If you’ve experienced financial stress or didn’t have open conversations about money growing up, finances can feel even harder to navigate.
Income, taxes, savings, credit, and other parts of money management can be a lot to figure out — especially when it’s new to you. For specific financial advice, licensed finance professionals are the best place to start. If you work, check with your employer to see if you have access to a financial adviser through employee benefits. If you’re in college, find out if you can attend a financial-planning session or if the college has someone you can talk to. Some cities and municipalities also have financial resources.
We’re here to help you understand how money mistakes can impact your emotional health — and how small changes can make all the difference. Below are 11 common mistakes you should avoid so you can take steps toward financial security and improved emotional well-being.
Believing There’s One Right Way to Manage Money
Some influencers make it seem like there’s a single way to handle your finances. You may think you’ll be all set if you just figure out the secret or follow their formula. But life is complex, and money is too. If there were a simple solution to financial stress — like skipping your daily coffee — we’d all be doing it. Unfortunately, we each need to find unique solutions that work for us.
Avoiding Your Bank Account
Avoidance is a common coping technique. We avoid conflict at work or hard conversations with friends. Some of us avoid our bank account, too, because it feels stressful to even think about it. But avoidance isn’t healthy, because eventually those problems will catch up with you. If you don’t know how much money you have, you may wind up paying overdraft fees or having your card declined at a store. If you aren’t in the habit of paying your credit card bill on time, you might unknowingly put too much on it and end up paying a high interest rate for something you wouldn’t have bought if you knew what was happening with your credit card balance.
Instead, train yourself to check your balance often. Logging in a few times a week can reduce your stress over seeing your balance, help you avoid overdrafting your account, and provide you with the information you need to make informed spending choices. Knowledge is power, and eventually knowing more about your bank account could help you feel more in control of your money.
Spending Money As Soon As You Get It
Spending money releases dopamine, a brain chemical that makes you feel good. But when that initial buzz wears off, spending can make your financial stress worse.
Challenge yourself to wait before making purchases. Even 24 hours is enough time to decide whether it’s something you really want or need. Also, try paying yourself first by putting a small amount into savings when you get your paycheck. That lets you control your money in a new way, and it will give you a satisfying dopamine hit each time you see your savings balance rise. It can also help you build up an emergency fund in case something happens. We never know when an unexpected event such as a car breaking down or an unforeseen medical bill will come up.
Not Having Fun
Making good financial decisions is a lot of work. To stick with it long term, you have to sprinkle in some fun. Each time you’re paid, after you’ve tucked away a bit, give yourself a little treat. It can be as simple as enjoying a burger at your favorite fast-food place, buying your favorite nail polish or hand lotion, or going to a movie with friends. The key is to find a little piece of joy to remind yourself that practicing good money habits is worth the work.
Not Having a Budget
Budgets are not just for people with lots of money — they’re for everyone. If you don’t have one, create a basic budget with categories for essentials (such as housing and transportation to work), saving (even if it’s tiny), and spending. You may notice you’re spending more than you’re earning. But now that you’ve seen that problem, you can start to fix it. The budget will help you.
Blaming Yourself for Not Having Enough Money
There are bigger factors that can impact your finances, including not having access to financial education in school, falling prey to predatory marketing from credit card companies, or facing discriminatory housing or banking policies. The environment you grew up in plays a role too. So cut yourself a break. Your bank balance is never a reflection of your actual worth.
Not Having a Bank Account or Credit
You, your family, and your community may have been harmed by banks, credit card companies, or student loan lenders. Maybe you saw houses in your neighborhood being seized by the banks that issued unaffordable mortgages, watched as your parents were denied for rentals because of their credit, or talked with an older sibling about how overwhelmed they are by their student loans.
It’s understandable if you want to avoid those systems. But most of us have to use them sooner or later. You may need credit to pay for a hotel room, a bank account to deposit paychecks into, or a loan to buy a reliable car for work. Establish bank accounts and credit on your terms, so you have them when you need them.
Not Talking About Money
There’s a lot of cultural pressure to avoid talking about money. But often that benefits people in power, such as bosses who can pay employees different rates. Talking about money openly can help you learn. Have conversations with your family, friends, and even coworkers about your finances, without shame, blame, or guilt. You may even find that you can help each other.
Only Following the Advice of a Financial Influencer
Following creators who post financial advice or watching financial commentators on television isn’t necessarily a mistake, but you need to be careful before acting on their recommendations. What they’re saying may not always apply to your situation, so always check with reputable sources before making any decisions.
Not Starting Savings or Investment Accounts Early
There’s no one right way to do this, but starting to put even a little money aside early on gets you in the habit of saving and the money you put in early will make you more money. There are easy ways to do this. You could start a Roth IRA, an employer-sponsored 401(k) or 403(b), a high-yield savings account, or a traditional savings account.
Using a Payday Loan
Payday loans — small, high-cost loans that are repaid on the borrower’s next payday — should be avoided at all costs. If there is an alternative option available, you almost always want to choose that.
You don’t have to change all your money habits at once. Pick one of these mistakes you’re making, and take the next month to focus on changing your habits. Those small changes will add up over time.
If you’re in debt, one way to dig your way out is to talk to a nonprofit credit counseling agency. These nonprofits are set up to help people with debt. They usually help you negotiate with credit card companies and get your payments down to a lower rate.