Making financial mistakes can be scary and seem disastrous, and experts say some of them actually have the power to change your future, but it’s not always about a “win it all or lose it all” situation.
Experts said that the lack of planning and the lack of specific goals are two of the most common mistakes.
James McManus, chief investment officer at online management services company Nutmeg, said: “Research tells us that those who pool their savings and investments into clear goals are more likely to commit to them.”
“You may be more likely to maintain diversification or ride out market volatility in the short term if buying that new home, dream trip or once-in-a-lifetime experience is on your mind,” he added.
It will also help you focus on the long term, which is crucial, according to Emma Lou Montgomery, associate director of personal investing at Fidelity International, who said many of the most common financial mistakes — like chasing after quick wins, trying to set your pace — Buying and selling with the market, reacting quickly to market fluctuations – they can all be avoided by taking a long-term perspective.
Another common mistake when it comes to investing, Montgomery said, is taking an “all or nothing” approach — noting that even small investments and basic knowledge can be enough to grow your wealth.
But many common financial mistakes are about losing or spending money rather than making it.
The senior personal finance analyst at Interactive Investor, Myron Jobson, advises that debt repayments, such as rent and bills, should be prioritized – which could have dire consequences.
He added that the lack of a “crisis fund” is another serious, but common mistake. “You need to build up a decent cash reserve.”
He noted that keeping part of your money in liquid form provides peace of mind in case something goes wrong. This is the money that will cover you when your liabilities run out, your car breaks down, or you lose your job.
And many of these mistakes may only have short-term consequences. But experts say there’s something often overlooked that can follow you for most of your life: poor retirement planning.
“When you’re young, your retirement seems so out of reach, and you’re faced with competing financial demands, it’s often something we think about putting off until we’re older,” McManus said.
Despite this, almost everyone eventually retires. “At any age that happens, you’ll need to make a big enough golden egg to live off of – so if you ignore your pension, you’re only going to make it harder on yourself later.”
So looking into options such as company pension plans, in which employers often contribute a larger percentage than employees, and spending relatively small amounts on your pension when you’re young can be game-changing when you finally retire, according to experts.
Montgomery said that doing this consistently and making sure to allocate more money as your income grows is crucial, according to what she told CNBC, and Al Arabiya.net viewed it.
Don’t beat yourself up too much
Experts said making a mistake with your money can be overwhelming — but it’s very normal.
“Mistakes happen – and the key to most of them is to learn and avoid falling into a pattern by repeating it!” According to Montgomery, whether it’s a spending spree or forgetting to read the lowercase letters, don’t cry too much.
Mistakes can often be fixed and are not the end of the world, experts say.
“The starting point is taking responsibility for your financial situation,” Montgomery noted.
While Jobson said one way to do this is to track spending habits on a spreadsheet or through third-party budgeting tools.
“Once you have a better idea of how you spend your money, you can explore ways to help you live within your means,” he added.
There are other forms of support, too, Jobson said. When it comes to debt, for example, you may be able to find a solution with your bank or get help from financial advice charities.
Even just a broad understanding of your financial situation can be a game-changer, says Montgomery. “Knowledge is power and ensuring that you have a clear understanding of all aspects of your financial situation will ensure such as your ability to prioritize and make informed decisions that support your goals.”