Personal Finances: The 11 Most Common Mistakes to Avoid

Do you tend to accumulate small expenses, neglect your savings, or live on credit? If you want to clean up your finances, you will need to change your bad habits! myLIFE has put together a list of the 11 financial mistakes to absolutely avoid.*

Julia may feel like she’s careful with her spending, but it’s systematic: at the end of the month, her bank account is in the red. In the best case, it’s just about balanced. Why can’t she do better and manage her expenses more effectively? What is she doing wrong? And how can she remedy this situation to finally save some money? Here is a list of the most common financial mistakes and some tips to help the young woman improve her budget and financial future.

Mistake 1: Not planning your budget

At the moment, Julia’s finances are a little sketchy. She receives her salary every month, pays her rent and fixed charges, but then she spends as she goes, without really paying attention.

Planning and calculating her budget may certainly seem tedious, but it is nevertheless one of the main keys to ensuring the good health of your finances. The first step is to establish a realistic budget. To do this, she must list her sources of income and her fixed and variable expenses. She can then categorize them (housing, food, leisure, etc.), but without being too strict. This inventory will allow her to visualize where her money is going and she will be able to identify areas to optimize.

To help her organize her personal finances, she can use banking tools that allow her to categorize her payments or even adopt the 50/30/20 approach. Julia will also find many practical tips in the special feature “Budget” on myLIFE.

Mistake 2: Accumulating small expenses

Every morning, on the way to work, our young professional stops to get a takeaway coffee at the bakery. Regularly, she also orders a salad or a sandwich for her lunch break and has gotten into the habit of doing quick grocery shopping in the evening when she gets home, without always knowing exactly what she has left in her fridge and pantry.

By becoming aware of her consumption habits, Julia will be able to make more thoughtful financial decisions and reduce unnecessary purchases.

In isolation, these little habits may seem insignificant. Added together, they can quickly weigh heavily on the balance. While the young woman should not forbid herself small pleasures from time to time, she must nevertheless monitor them and set limits, starting by identifying expenses she could do without: does she really need to buy yet another pair of shoes or order that takeout meal when her fridge is full? By becoming aware of her consumption habits, Julia will be able to make more thoughtful financial decisions and reduce unnecessary purchases.

Mistake 3: Multiplying subscriptions

Over the years, our young thirty-something has subscribed to several services: streaming platforms, online music, paid mobile applications, etc. Although she no longer really pays attention to these automatic deductions, they nevertheless nibble away a small part of her budget each month.

To reduce her expenses, she should review all these costs and seek to optimize them: review her phone plan options, cancel the gym membership she no longer attends, delete the paid yoga app she hasn’t used in months, etc. By stopping unnecessary services and getting into the habit of comparing the different offers on the market, she will avoid wasting money. And if Julia wanted to kill two birds with one stone, she could immediately set up a standing order to her savings account for an amount equal to what she saves by cancelling some subscriptions.

Mistake 4: Living on credit

Julia has gotten into the habit of taking out small loans to pay for some of her purchases: furniture, computer, phone, etc. She also willingly uses her deferred debit credit card to accumulate her payments at the end of the month. By doing so, she feels freer on a daily basis.

However, this approach can encourage spending more money than one has. The deferred debit card has certain advantages, but it is advisable to use it responsibly and to repay debts each month to avoid paying additional fees. An overdraft is never a good idea.

Regarding loans, while some are almost inevitable, such as buying a house, it is advisable to think twice for more common expenses. Before committing, Julia should always carefully study the terms of the contract: repayment conditions, amount of monthly payments, etc. Very often, “small loans”, such as revolving credits, have high and often variable interest rates. Accumulating them exposes one to the risk of over-indebtedness.

Mistake 5: Neglecting savings

Saving is not a priority for Julia. She believes that after paying her fixed expenses, she deserves to enjoy her money and indulge in outings, leisure, and other activities.

The problem is that she is not safe from an unexpected event: unreimbursed medical expenses, reminder of rental charges, car repair, etc. That’s why it is strongly recommended that she build up a precautionary savings by setting aside money in an easily accessible account. Julia doesn’t need to deposit a large sum, she just needs to be consistent. She can, for example, set up an automatic transfer at the beginning of each month to save without thinking about it.

Mistake 6: Aiming too high

The young woman does not hide it; she loves beautiful objects. And to please herself, she does not hesitate to pay more (and sometimes go into debt) to acquire them. But does she really need to buy that trendy large sedan or rent a 90 m² apartment when she lives alone? While it is not our place to judge, we can encourage self-reflection.

Thus, Julia must learn to differentiate between her “needs” and her “wants.” Without eliminating all those extras that make her feel good, she can try to make more balanced choices more often. By revising her selection criteria, she can achieve significant savings at the end of the month! A more modest vehicle will cost less to purchase, but also in insurance and maintenance. The same goes for her housing: by choosing a smaller property, her rent and utility costs will decrease, as will her equipment needs. The principle is to adjust her choices to her means. Even if her means increase, care must be taken not to succumb to lifestyle inflation, meaning seeing expenses rise even faster than income.

Mistake 7: Only buying new

In need of storage furniture, new pants, or a book: it’s a reflex, Julia goes to the nearest store or orders online. However, there are other alternatives that would allow her to buy differently: second-hand products. The second-hand market has been booming in recent years and there is a wide range of choices to find what you want: thrift stores, second-hand clothing sales, recycling centers, flea markets, garage sales, etc. In addition to being economical, this mode of consumption is also more environmentally friendly. It is therefore possible to treat yourself at a lower cost while taking care of the planet!

The earlier she starts saving, the more she will accumulate significant long-term savings.

Mistake 8: Ignoring retirement planning

Retirement still seems far away for the young woman, who considers that she has other priorities than thinking about what will happen in about thirty years! What she doesn’t realize is that the earlier she starts saving, the more she will accumulate significant long-term savings. She can inquire with her company to find out if a supplementary pension plan is offered to employees or subscribe to an individual retirement savings plan. Besides the tax benefits, this will allow her to have an additional income and worry less about her quality of life once retired.

Mistake 9: Lack of foresight

Julia is never sick and she takes great care of her belongings. Apart from those that are mandatory, insurance is superfluous for her.

However, even if taking out such products represents a sum of money that may seem significant, neglecting insurance is risky. No one is safe from an unforeseen event, whether it concerns health, housing, or automobiles. Without appropriate coverage, the financial consequences could be severe, even catastrophic.

She can approach an insurance company that can inform her about the appropriate protections for her needs.

Mistake 10: Losing interest in finance

For Julia, there is no need to be an expert to manage her finances well. She goes with her instincts and trusts the people around her who are knowledgeable. However, she could take the time to develop her knowledge of finance (budget management, savings, investment, opportunities, risks, etc.) in order to be able to make more informed decisions and prepare her projects with full awareness. This would help her better understand financial mechanisms and more easily identify attempts at fraud or banking scams.

Once she has managed to get her budget management under control, she will be able to start thinking about the best way to grow her assets.

Mistake 11: Waiting too long to invest

According to Julia, investing is reserved for people with significant financial assets. However, investing does not necessarily mean diving into stocks, bonds, and other structured products. It also means putting money into life insurance, a retirement savings plan, or even a real estate project.

Once she has managed to get her budget management under control, she will be able to start thinking about the best way to grow her assets. She can, for example, base her approach on the investment pyramid strategy, which involves distributing her money between secure and liquid investments (money is readily available) and long-term investments (less liquid and riskier, but also, in principle, more profitable).

To advise her, she can turn to her banker, who can guide her towards the most suitable solutions for her profile and financial goals.

By becoming aware of her mistakes, Julia is already taking a first step toward improving her finances. With a bit of discipline, she should be able to adjust her expenses and lay the groundwork for a healthier financial situation. If she truly feels overwhelmed, she should not hesitate to seek guidance from experts in managing her money. All the best to her!

* Content translated from French by the BIL GPT AI tool