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Top 5 Financial Mistakes Beginners Make

 There’s a lot of financial advice out there. Enough that your head starts to spin when you try to take it all in, understand it, and figure out which pieces are relevant to you.

I’d like to make it a little easier for you by pointing out some things NOT to do.

Here are five of the biggest mistakes I see people making when they first start trying to improve their financial situation.

1. Obsess Over Investment Strategy

There’s often this feeling that if you can just find the perfect investment strategy, your financial success will be guaranteed.

So you read articles, listen to the experts on TV, and tinker with your investments, all with the hope of finding an edge that puts you over the top.

But here’s the truth: the returns you earn, good or bad, have almost no impact on your bottom line until you’re a decade into the process.

What does matter, a lot, is your savings rate. It may not be sexy, but simply saving enough money is far more important than any other investment decision you can make.

2. Forget About Irregular Expenses

If you’ve tried budgeting before and it hasn’t worked, chances are you’ve been undone by all the unexpected expenses that keep popping up.

Your car needs a new tire. Your daughter has to go to the doctor. Your friend gets married in another state.

Here’s the thing: a good budget knows that these kinds of expenses aren’t unexpected. You may not know when they’re coming, but you do know they’re coming.

And you can make them a part of your regular budget simply by saving ahead for them each month. That way the money will already be there when you need it.

3. View Cutting Back as the Only Option

Cutting spending is often the quickest and easiest way to free up room in your budget for the big financial goals you’d like to achieve. Which is why it’s usually a great first step.

But it’s not the only option.

In fact, the biggest long-term results often come from finding ways to increase your income. So don’t be shy about asking for a raise or starting a side hustle. Those are powerful tools that can expand your world of financial opportunities.

4. Think That Credit Card Debt Is Normal

According to NerdWallet, the average American had $15,310 in credit card debt as of 2015. So I guess debt is normal in the sense that a lot of people have it.

But if you want to be financially healthy, you need to accept that credit card debt cannot be part of your life. It’s actually the biggest obstacle that’s keeping you from reaching your goals.
If you have credit card debt, getting rid of it is almost always a top financial priority. That may mean that other financial goals have to wait, but the sooner you get rid of your debt, the sooner you’ll be able to make real progress towards the things you care about most.

5. Look for Easy Fixes

Unfortunately, there is no easy button when it comes to your finances. The solutions are often fairly simple, but they take time, dedication, and hard work before they truly pay off.

For example, creating an account with mint.com and linking all your bank accounts is a great start to the budgeting process. But the app itself won’t solve all your problems.

You’ll still need to take the time to categorize your expenses, both up front and on a regular ongoing basis. And you’ll need to use that information to take action and make changes in how you use your money.

No single app or tactic is going to fix everything for you. You have to take ownership of your situation and do the hard work to make it better.

Focus on What Matters

There’s a lot of noise out there in the world of personal finance advice. And your job is to filter that out so that you can focus on the small number of things that actually matter for your personal goals.

Avoiding common mistakes is a big part of doing that well. And if you can avoid the five mistakes above, you’ll be off to a good start.