We can all likely think of a few reasons why we haven’t done certain things when it comes to managing our finances, like saving money and building wealth. Additionally, most people could list a long string of poor financial decisions they’ve made. Even though everyone has financial mistakes, it’s crucial that we own up to them and take steps to get our finances in better shape!

There’s always room for improvement with your money, no matter what financial decisions you’ve made in the past. And learning from other people’s financial mistakes can be a great opportunity to improve your own financial situation!

It’s particularly important for women to be on top of their finances. Not only do we tend to earn less than men, but we’re also more likely to take career breaks to raise families. As we also live longer on average than men, this means we’ll likely need our money to last longer. So, managing it wisely is essential.

Now, let’s take a look at some common financial mistakes women make. After that, we’ll discuss how to get back on track and start making smarter choices for the future!

10 Financial Mistakes to Watch Out For

Many people make these common financial mistakes. Can you relate? But fear not! We’ll also explore key strategies to avoid them or recover if you’ve already made them.

1. Not Setting Aside Money Each Month

When it comes to saving, many people say they simply don’t have anything left after the bills are paid to contribute to an emergency fund or retirement savings.

Yet, some of us manage to earn enough to afford hobbies, nights out for dinner and drinks, and much more! I often hear things like, “Well, a meal out only costs £20, it doesn’t make a difference.”

On the other hand, if you were to save £20 each week for a year in a zero-interest savings account, you’d end up with £1,040. What if you kept doing that for five years? You’d have over £5,200! And, you probably wouldn’t miss the £20 you saved each week!

It might seem normal, but not putting money aside in your savings account each month can have a negative impact on your future self. This often happens when people think they have plenty of time to save later on, or haven’t set any clear financial goals for themselves.

The problem is, by doing this they end up paying themselves last. There’s no doubt about it, this is a bad financial habit.

If you haven’t been saving yet:

There are some simple steps you can take to start building a savings habit.

• Budgeting is key. Experiment with different budgeting methods to find what works for you, and stick to a monthly plan.
• Pay yourself first. Aim to save at least 10% of your income each month before you start spending. If 10% feels overwhelming to begin with, start with 5% and gradually increase it to 10% over a few months.
• Automate your savings. Setting up automatic transfers to your savings account can make it much easier to stick to your savings goals.

2. Twenties: Time to Spread Your Wings (But Not Your Finances Too Thin!)

Your twenties are often a time of firsts: your first proper pay cheque, graduating from university, maybe even moving out on your own. Suddenly, the world’s your oyster, and you can finally do all those things you couldn’t afford before.

Compared to someone in their thirties or forties, you likely have less debt at this stage. This freedom can make it tempting to let loose financially, prioritising fun over future planning.

It’s easy to get swept up in the excitement of earning your own money, but remember, the future’s always just around the corner. Make sure to make smart financial decisions alongside all those new experiences.

Even if you are living it up:

There’s good news! You might still be young, and that means you have time on your side.

Remember, though, there’s no substitute for lost time and the power of compound interest. So, it’s important to learn how to budget effectively and prioritise your future financial security, even if it means adjusting your spending habits a little.

Your twenties are a golden window to make financial decisions that will impact your future for years to come. If you can, try to start building wealth during this time.

3. Maxing Out the Credit Card

One of the biggest financial mistakes people make is failing to keep up with their credit card repayments. For many, a large chunk of their credit card debt comes from buying things they don’t actually need. Even small purchases, like daily lunches out or that “must-have” outfit, can quickly add up, leaving you with a mountain of credit card debt before you know it.

Here’s the key: that available balance on your credit card isn’t free money. Credit is essentially borrowing money, and you have to pay it back! Remind yourself of this to avoid future financial regret.

How to Tackle Credit Card Debt

Think of credit card debt as a roadblock on your journey to financial freedom. To get past it, you need a plan to smash (or should we say, strategically dismantle?) that obstacle! Saving can be tough while you’re paying off high-interest debt.

But the good news is, with a clear plan and some dedicated effort, especially when it comes to credit card debt, you can clear your debt much faster. Then, you can focus all your energy on building your savings.

If you’re struggling with debt, focus on paying off your credit card first. Here are some strategies to consider, like the debt snowball method.

4. Procrastinating on Your Finances

Putting off important financial decisions – like paying off debt, saving for the future, or investing – can be a costly mistake. We all tell ourselves we’ll get around to it one day, but time has a nasty habit of slipping away when we’re stuck in neutral.

Stop the Procrastination Cycle!

The key to overcoming financial procrastination is to break down those big tasks into smaller, more manageable steps. This will make them seem less daunting and help you avoid putting things off any longer. Set clear deadlines for each step to create a sense of urgency and keep you on track.

Empower Yourself with Knowledge!

Feeling in control of your finances is key. To achieve this, educate yourself on the choices you need to make – from managing debt and budgeting to investing for the future. There are plenty of resources available online and in libraries.

Don’t be afraid to seek help!

If you need extra guidance or someone to hold you accountable, consider talking to a financial advisor or mentor who can offer tailored advice.

Small Steps, Big Progress

One of the best ways to overcome procrastination is to break down your goals into bite-sized chunks. Set yourself a small, achievable daily goal that will move you closer to your financial objectives. This will help you gain momentum and avoid feeling overwhelmed.

Top Tip

I find it useful to set myself reminders – both positive and negative. Remind yourself of the benefits of making sound financial decisions now, like reaching your goals and achieving financial security. But don’t shy away from acknowledging the downsides of inaction, such as missing out on your goals or facing financial difficulties later down the line.

5. Ignoring Investment Opportunities

Choosing not to invest at all is a big financial mistake. Leaving your money sitting idle won’t see it grow, and to achieve your long-term goals like a comfortable retirement, you’ll need it to work for you.

Forget the myth that you need to be a stock market whizz to invest! Thanks to technology, there are now more accessible options than ever before. Getting started with investing has never been easier.

Getting Started with Investing

There are many paths you can take when it comes to investing – property (real estate), the stock market, or even company shares (shares in individual companies). Whichever route you choose, thorough research (due diligence) is essential. Understanding the basics of the investment you’re considering is key to making informed decisions.

While the stock market might not seem like a risky gamble on the surface, it can be if you don’t have a clear strategy and defined goals for your investments.

One popular investment option is buying shares in companies. Historically, the stock market has offered average returns of around 10.7% over the long term.

If you’re feeling overwhelmed by investment options, don’t be afraid to seek help. A financial advisor can guide you through the process, explain terms like the difference between index funds and exchange-traded funds (ETFs), and help you create a personalised investment portfolio that considers your risk tolerance and financial goals.

The golden rule of successful investing is diversification. This means spreading your investments across different asset classes to minimise risk. Make sure your portfolio is well-diversified to ensure you’re on the right track to achieving your financial goals.

6. No Safety Net

Life can be unpredictable, which is why having a financial safety net, or emergency fund, is crucial. Without one, you’re exposed to the risk of expensive, unexpected events derailing your financial wellbeing.

Building Your Back-Up Plan

The foundation of a good financial safety net rests on two key pillars:

• Emergency Fund: Aim to save three to six months’ worth of essential living expenses. This will provide a buffer if you face job loss, illness, or other emergencies.
• Adequate Insurance: Having the right insurance in place protects you from unforeseen financial burdens. Consider health insurance, car insurance, life insurance, disability insurance, and depending on your circumstances, home insurance or renters’ insurance.

Building Your Emergency Fund & Reviewing Insurance:

• Pay Yourself First: Factor your emergency fund into your budget and set aside money for it every time you get paid. This ensures you’re consistently building your financial buffer.
• Review Your Insurance Coverage: Take stock of your current insurance situation. Do you have any gaps? For example, if you rent a flat, do you need renters’ insurance? Is your car or health insurance coverage sufficient?

Having a well-funded emergency pot and the right insurance in place will give you the peace of mind to stick to your financial plan. More importantly, it could literally be a lifesaver. Instead of resorting to debt or depleting your investments and savings to weather unexpected storms, you’ll have a financial cushion to fall back on.

7. Guarding Your Personal Information

In today’s online world, identity theft and credit card fraud are unfortunately rife. Failing to take steps to secure your personal and financial information can leave you wide open to financial ruin.

Data breaches are on the rise, meaning fraudsters and hackers can easily get their hands on a wealth of personal details, like your address, date of birth, and more.

How to Guard Your Personal Information

Protecting yourself doesn’t have to be complex. Here are some key strategies:

• Monitor Your Credit Report: Keeping an eye on your credit report allows you to identify any suspicious activity early on. Many credit card companies and banks offer free credit monitoring services – take advantage of them!
• Credit Freeze/Alerts: Consider a credit freeze or credit card alert system. A freeze restricts access to your credit report, making it harder for fraudsters to open new accounts in your name. Alerts notify you of any changes to your credit report, so you can stay informed.
• Be Wary of Unfamiliar Websites: Don’t share personal information on websites you don’t trust. Look for signs a site is secure, like a padlock symbol in the address bar and a web address that starts with https://.

8. Small Wins Matter

Think saving £15 a week or paying down £20 on your credit card this month isn’t a big deal? Think again! Even small financial goals can make a big difference over time.

These little wins are what lay the foundation for achieving your bigger financial goals. They help you build momentum and good habits that will serve you well in the long run.

Here are some examples of achievable financial goals you can focus on:

• Build an Emergency Fund: Aim to save £1,000 for unexpected expenses. This buffer will protect you from financial difficulty if you face job loss, illness, or other emergencies.
• Pay Down Credit Card Debt: Make a habit of paying more than the minimum amount due on your credit card each month. This will help you clear your debt faster and save on interest charges.
• Reduce Monthly Expenses: Review your budget and look for areas where you can cut back on spending. This could involve finding cheaper alternatives for groceries, utilities, or entertainment.
• Boost Your Retirement Savings: Increase your contributions to your pension plan (if you have one) or start a retirement savings account.
• Improve Your Credit Score: Taking steps to improve your credit score, such as paying bills on time and keeping your credit utilisation low, can save you money on loans and insurance in the future.
• Explore Side Hustles: Consider starting a side project to generate extra income. This could be anything from freelance work to selling crafts online.

Having clear long-term goals is essential – they’re your ultimate destination. We all love setting yearly targets, but it’s easy to get bogged down if we don’t break them down into smaller chunks. This can leave you feeling overwhelmed and lacking a sense of progress.

The Power of Short-Term Wins

That’s why I recommend setting both short-term and long-term goals. By focusing on your short-term goals on a daily basis, you’ll make steady progress and stay motivated on your journey towards your long-term vision.

9. Lacking Accountability

Without taking responsibility for your financial goals, you lose a crucial motivator. There’s no one to hold you accountable, remind you of your targets, or keep you focused.

This can easily lead to complacency. You might find yourself putting things off, saying “I’ll do it later” one too many times. Worse yet, you might start doubting your own abilities and convince yourself you can’t achieve your goals.

How to Stay Accountable

Taking responsibility for your finances is key, but you don’t have to go it alone! Here are some ways to find the accountability you need:

Build Your Support Network

Sharing your financial goals with a trusted friend or family member can be a powerful motivator. They can offer encouragement, ask about your progress, and help you stay on track. This can be a great way to avoid impulsive financial decisions.

Consider a Financial Buddy System

Think about finding a financial buddy – someone who’s also working towards their own financial goals. You can hold each other accountable, share tips and strategies, and celebrate each other’s successes.

Explore Professional Help

A financial advisor can provide personalised guidance and support. They can help you create a financial plan, make informed decisions, and stay motivated on your financial journey.

10. Blind Spots

How can you measure success if you don’t track your progress? Without monitoring your goals, you might miss reaching milestones or celebrating achievements.

Keeping Track of Your Journey

The key is to regularly review your financial goals. Here are some simple ways to stay on top of your progress:

• Create a Goals Calendar: Map out both your short-term and long-term goals on a calendar. This will give you a visual representation of your journey and help you stay motivated. A physical planner can be a great tool for this.
• Utilise Goal Tracking Tools: There are many goal tracking tools available online or in planner apps. These can help you set deadlines, monitor progress, and celebrate your wins.

My Personal Tip: I find using a goal planner keeps me focused and motivated. I can record my goals and create a clear timeline for achieving them.

How To Recover From Bad Financial Decisions

We’ve all made financial mistakes from time to time, so don’t beat yourself up about it!

The good news is, there are several approaches and methods you can use to recover from a past financial error. Here are some tips to help you make wise financial decisions moving forward.

Step 1: Right the Ship and Move On

The first step is to take ownership of any poor financial decisions you’ve made, but then forgive yourself. Accepting responsibility for your mistakes is essential if you want to make progress financially.

Remember, even the most successful people have made financial blunders along the way. The key is acknowledging your mistakes and figuring out how to put things right. It’s a cycle – you take responsibility, learn from it, and apply those lessons to avoid repeating the same (or similar) mistake. That’s the path to financial success.

Having forgiven yourself and decided to move forward, it’s vital to take stock of your current financial situation. This will help you determine your ideal location.

Step 2: Seize the Moment and Take Control

Now is the perfect time to make positive changes to your financial situation. Once you’ve decided to make wise financial decisions, there’s no need to wait for the new year – you can start right away!

Developing a sound financial strategy involves prioritising saving for the future, reducing spending on bills and debt, and potentially increasing your income. By focusing on these areas, you’ll be well on your way to financial success.

Embrace change and commit to taking action now to get your finances in order. Don’t wait for some mythical “perfect time” to start organising your money. Begin today, even if it’s just by putting aside £5 a week – every little bit helps!

Make that £10 payment, even if it means you can only contribute £10 towards your debt this week. Once you’ve reduced your spending and increased your income, you’ll be able to ramp up your debt repayment or savings efforts and get back on track with your financial goals.

Additionally, identify any triggers that lead to overspending and develop a strategy to avoid them and minimise mistakes in the future. Remember, your financial situation is a journey that’s always evolving. As you save more, pay down debt, and boost your income, bouncing back from any past financial missteps will be much easier.

Depending on your situation, you might also consider seeking assistance from reputable tax or financial advisers. A good solicitor for legal advice could also be beneficial. It’s always wise to research any financial advisor beforehand to ensure they’re a good fit for your needs.

Step 3: Find Inspiration and Motivate Your Circle

Getting started with better financial decisions is easy! Dive into personal finance and development resources: read books and blogs, watch videos, or listen to podcasts. Surrounding yourself with positive influences is equally important. Find people who inspire you to work hard and persevere through challenges – their motivation can be contagious!

What’s a Financial Faux Pas?

A poor financial decision, or a “financial faux pas” as some might say, is anything that goes against your financial goals or puts your finances in a worse position. Common culprits include overspending, neglecting to save, and racking up credit card debt.

But don’t panic if you’ve made some financial missteps! Just devise a plan to tackle them and get back on track. Remember, the long-term benefits outweigh any short-term costs, like stricter budgeting or a money-saving challenge.

What is the best financial decision?

There’s no single “best” financial decision, but investing and saving for your future is certainly one of the smartest. By setting aside money and putting it to work through investments, we can all be better prepared for whatever life throws our way.

Whether it’s bills, emergencies, or retirement, we all need financial security. Investing and saving can empower us to manage our money confidently and face life’s transitions with peace of mind.