The Biggest Financial Mistakes People Make and How to Fix Them

Summary: We all make mistakes, but financial mistakes can be especially costly. These are the biggest financial mistakes people make and how to fix them.<br> There are some mistakes you can’t fix, but financial mistakes usually don’t fall into that category. It’s not always easy, but most <a href="https://www.listenmoneymatters.com/big-money-mistakes-big-changes/">financial mistakes</a> can be rectified.<br> Joy Liu from <a href="https://www.listenmoneymatters.com/go/the-financial-gym/">The Financial Gym</a> is here to tell us about the biggest financial mistakes she helps her clients fix.<br> You’re Too Vague<br> It’s great to have financial goals, but they have to be well-defined. “I want to buy a house” is not a well-defined goal. When do you want to buy a house, in years, in ten years?<br> How much house can you afford? It’s easy to be seduced by the number you see when you input your numbers into one of those online mortgage calculators. Damn! You could own a whole house for what you’re paying in rent!<br> But there are a lot of <a href="https://www.listenmoneymatters.com/buying-a-house-hidden-costs/">hidden costs</a> in buying and owning a home. You need to factor them in to know how much house you can actually afford.<br> Will you be able to come up with at least a 20% down payment? If not, you’ll get stuck paying<a href="https://www.listenmoneymatters.com/how-to-buy-a-house/"> PMI.</a><br> If you want to buy a house, understand your real numbers. Once you do that, you can break your goal down into small, manageable steps.<br> You Have No Debt Plan<br> If you have debt, especially high-interest debt, like <a href="https://www.listenmoneymatters.com/how-to-pay-off-credit-card-debt/">credit card debt,</a> you can’t just ignore it or throw money at it haphazardly. Know the balance and the interest rate on each card. Use the <a href="https://www.listenmoneymatters.com/get-out-of-debt-snowballing-stacking/">snowball or stacking method</a> to pay the cards off.<br> <br> We know it’s scary to open your mail when you’re in debt and getting collection notices, but you can’t solve the problem if you don’t know the scope of it. Some of those debts could be relatively small and paid off before they’re sent to collections.<br> Debt in collections is going to really do a number on your <a href="https://www.listenmoneymatters.com/highest-credit-score/">credit score.</a> Open your mail and if you’ve moved, update your address with any company you owe money to.<br> If you’ve lost your job, call and let your debtors know. It’s in their interest to work with you. They may be able to lower your payments or put your account in forbearance. In the case of student loans, you may be able to get a deferment. Don’t just start missing payments.<br> Being in debt sucks so it’s understandable you want to pay off as much as you can as fast as you can. But make sure you’re not using money that you need for necessary living expenses like rent and groceries to pay that debt.<br> All you’ll end up doing is going into more debt because now you have to put those things on the very credit cards you’re trying to pay off. Debt repayment should be a regular budgeting category.<br> Too Much Cash<br> There is such a thing as too much cash if it’s sitting around in your checking or savings account making 0.00001% interest. You might think your money is nice and safe there, but it’s <a href="http://money.cnn.com/2017/06/07/pf/savings-account/index.html">losing value</a> because of <a href="https://www.listenmoneymatters.com/econ-101-inflation-and-the-economy/">inflation.</a><br> Historically, the average rate of inflation in the US is around 3%. That means that any long-term saving and investing strategy needs to realistically plan for a return of at least 3% just to keep from l...