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For many of us, we end up ruining our financial lives before we even get started.
You might wake up one day, see your finances in shambles and wonder how you got yourself into the mess you are in.
Chances are there is not one specific thing you did.
It was a combination of things over many years that lead you to where you are today.
You might feel shame, embarrassment, even hopeless.
But the good news is you can improve your financial life.
In this post, I share with you the biggest ways to ruin your financial life.
So if you are reading this and are in financial trouble, you will learn the steps to take to start to make a positive change.
And if you are one of the lucky ones who is doing well financially, here are the things you need to avoid doing at all costs.
Table of Contents
25 Ways For How To Ruin Your Financial Life
#1. Not Saving Money
The economy today can be a bit more difficult to navigate, which means that some people find it hard to save while covering all of their essential expenses.
In fact, one study conducted by LendingClub and PYMNTS found that approximately 54% of Americans are living paycheck to paycheck.
And 40% of those making $100,000 or more fall into this category as well.
But while saving can be difficult, it’s absolutely necessary if you’re not interested in experiencing financial ruin in one fell swoop.
Having an emergency fund to fall back on when something breaks down or having money that’s gradually accumulating to help you reach a goal is something that everyone needs.
- Read now: Discover how to quickly build an emergency fund
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If you find yourself without any money saved, you might have to rely on tools like credit cards or payday loans to cover these unexpected expenses.
This only digs you deeper into debt and worsens your financial situation.
No matter how much you’re making, aim to save a little bit of that first so that you have something to dip into when the need arises.
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Start off by saving $25 a month and increase this amount as your income increases.
Of course, if you can afford to save more than this, then make sure you do.
#2. Trying To Keep Up With Others
There are many ways to measure success, yet the only one that matters is what you define for yourself.
And it can be difficult to figure out what success means for you when you’re constantly comparing your life to others.
It’s easy to compare your standard of living with friends or co-workers and feel like you’re not getting ahead.
But comparing yourself to others is a big mistake.
For starters, you have different values and goals in life.
They may have a big luxury SUV because they have a family.
If you don’t, then you don’t need a big luxury SUV.
Also, you don’t know what is happening behind closed doors.
They could simply be trying to keep up with others and as a result, are in a mountain of debt and feeling stressed.
Think about the times you hear about a couple separating and how shocked you are because they seemed so happy.
The same is true with money issues.
You don’t see the real truth.
Focus on yourself, your needs, and what makes you happy.
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#3. Failing To Start A Budget
If you want to ensure do don’t achieve financial success, then make sure you never set up a budget.
Many people today may have great incomes but very poor spending habits.
Even if it seems like you always have enough, chances are that you’re gradually whittling down your checking account until you have nothing left to spend.
If this doesn’t happen first, you’re wasting money that you could be putting towards investments and savings.
Once the money is spent, it’s gone.
You can’t get it back, and it takes much more time to save money than it does to spend it.
If you spend it all on frivolous things and you don’t have enough for rent, utilities, or car payments, for example, you’re out of luck.
If you don’t already have one already, now is the time to create a budget and to stick to it.
There are plenty of great budgeting methods out there to choose from.
- Read now: Learn how to get started budgeting
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You can create your own budget using excel spreadsheets, or download an app and automate the entire process.
Or you can find something in between that is automated but still has you do some work.
Tiller Money makes spreadsheet budgeting simple and fast. Use their pre-made budget and let Tiller automatically import your transactions. All you do is categorize them and you are done. No risk 30 day free trial.
No matter which option you choose, creating a budget is the best way you can easily stay on top of your finances.
#4. Going Into Credit Card Debt
Credit cards are essential tools for building credit and credit history.
They can even be used to help you earn cash back or lower the cost of the things you buy through the rewards points you earn.
However, too many people will use these cards like they were cash when they find themselves in a bind.
With higher credit card balances, you have larger monthly payments, adding stress to your life.
And the higher your balance, the more interest you are paying too.
Another result of high interest debt is your credit score will drop drastically.
When you have large balances, their credit utilization ratio increases and your credit score drops.
As your score drops, it is harder for you to qualify not only for new credit cards, but also other types of loans too, like a mortgage or auto loan.
When you do qualify, your interest rate will be higher.
This makes your monthly payment more, meaning it will be harder to pay your bills and still save money.
And the higher interest rate means you will pay higher amounts of interest charges over the life of the loan.
For example, a $200,000 mortgage for 30 years with a 3% interest rate costs a total of $303,554.
Increase the interest rate to 4.5% and your total cost comes to $364,813.
That is close to $60,000 you could have saved!
Make sure you only use your credit card when necessary and make sure you have the cash on hand you need to make the payment during the next billing cycle.
#5. Making Late Payments
Another huge mistake with credit cards is missing the payment due date.
While this doesn’t seem like it would be a big deal it is.
For starters, you get charged a late fee, which is around $40.
From there, most credit cards will put you into the penalty APR, which is an interest rate even higher than what you are paying on new purchases.
This will only balloon your debt even more.
And finally, when you are late, the credit card company will report it to the credit bureaus, which will in turn lower your credit score.
#6. Not Making Payments
If you are in a lot of debt, you might get to the point where you want to give up and stop paying altogether.
Doing this ensures that your credit score craters and getting new loans will become close to impossible.
Plus you will have higher monthly payments from a higher interest rate.
And finally, debt collectors will start calling you, making your life a living hell.
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#7. Taking Out Too Much In Student Loans
Student loans are necessary for most college students.
However, you don’t want to go overboard and borrow so much that you don’t have a chance of paying it back.
The idea is to borrow enough so you can get your education, but also not so much that you are unable to pay it back.
Some experts say you shouldn’t take out more than what your expected starting salary after college will be.
This means if you expect to make $40,000 a year after school, don’t borrow more than $40,000.
The last thing you want is to be saddled with a huge monthly payment that will make getting by that much harder.
And if you find that you don’t enjoy the career field you majored in, you are going to feel regret that you spent all this money for nothing.
#8. Not Investing Your Money
The future always seems like it’s so far away.
However, you’ll find that it rushes toward you at breakneck speed.
If you haven’t been doing things like investing your money to grow it over time, you’re going to find yourself dealing with numerous financial issues in the future.
Why is it so important to invest?
There are a number of reasons.
First, it allows you to keep up with the speed of inflation.
If you aren’t investing your money to grow it faster than the current inflation rate, you’re actually losing money, no matter how much of your income you’re stashing away each month.
Second, investing provides you with the money that you’re going to rely on to make it through retirement.
Once you quit working, Social Security will only offer so much monthly.
Your savings and investments will help you pay for essentials, medical services, and beyond.
If you have no assets by the time retirement rolls around, you’re going to find it very difficult to afford the lifestyle you want or need.
At the end of the day, investing is critical if you want to reach your long term financial goals.
So make sure you take the steps to start sooner rather than later.
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#9. Putting Off Saving For Retirement
A common mistake people make is thinking they will start saving for retirement at a time that is better for them.
In their 20’s, they might think they have more than enough time to get started.
When they are in their 30’s, they have added bills from being a new family.
By the time they are in their 40’s and 50’s, the focus is more on college for their kids.
And before they know it, they want to retire but haven’t saved a dime.
The reality is, if you don’t start soon enough, you’ll find it harder to get to the point you need to be at to fulfill your retirement plan.
It’s always better to get started sooner rather than later.
For example, waiting 10 years to start saving for your retirement can mean having $800,000 less!
This assumes you save $5,000 annually earning 8% for 40 years.
If you haven’t already, consider looking at an app like Acorns to begin your investment journey or reach out to a financial professional who can walk you through the next steps and map out your financial future for you.
Acorns changed the game when they allowed you to start investing your spare change. With a simple to use app and effortless ways to invest, Acorns is a solid choice for many investors just starting out without a lot of money to invest.
Better late than never, but it’s always better to get an early start.
#10. Not Negotiating Job Offers
Too many times when we are offered a job, we simply take the offer without thinking of asking for a larger salary.
But in many cases, the employer is expecting you to counter.
And asking for more money adds up over time thanks to compound interest.
For example, let’s say you are offered a job earning $40,000.
Over the next 5 years, you earn a 3% raise annually.
At the end of 5 years, your new salary is $45,020 and you earned a total of $212,365.
But let’s say you negotiated that offer and ended up starting out at $42,000.
At the end of 5 years, your new salary is $47,271 and you earned a total of $222,983.
By just getting $2,000 more at the start you ended up with over $10,000 more in lifetime earnings.
And this is just looking at 5 years.
If we extend this example out 25 years, the difference in lifetime earnings comes to $73,000!
The bottom line is, don’t feel weird about asking for more money when presented with a job.
Counter with a slightly higher salary and find a middle ground.
#11. Earning More Money With Side Hustles
If you only rely on your income to survive financially, you are putting yourself at risk.
This is because if you lose your job, you are going to experience a lot of stress until you have a steady paycheck again.
To combat this, it is advised you have another source of income.
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This way, should you lose your main source of income, you still have money coming in.
And if you don’t lose your job, you have extra money to put towards savings or pay off your debt faster.
#12. Buying Too Much Of A House
Becoming house poor is an all too real experience for many homeowners.
People end up buying a house that is at the upper limit of what they can afford, and then they are stuck with a high monthly mortgage payment.
This large payment eats into their ability to save money, putting them behind when it comes to saving for retirement.
It even puts stress on trying to save for other short term and long term financial goals.
When you are shopping for a home, make sure you are looking at homes you can comfortably afford the monthly payment.
The last thing you want is to be living paycheck to paycheck because the house you bought is one you can’t afford.
#13. Not Talking Money Before Marriage
Getting married is a wonderful experience that can lead to a happy life together.
But it is best to walk into the relationship with your eyes wide open when it comes to money.
When you are planning on getting married, make sure you both sit down and discuss your financial situation.
This includes how much debt each of you has, what your current monthly income is, and what your long term financial goals are.
If you both know this information before marriage, it helps you work together to achieve them.
Also, there are different money personalities.
Some people are savers and tend to live frugally.
Others like to spend their money and live life.
While opposites attract, these fundamental differences with how money should be handled can lead to a lot of money stress and possibly even divorce.
So make sure before you get married, you have many in-depth conversations about money.
#14. Buying An Engagement Ring You Can’t Afford
Many people see that an engagement ring is a symbol of their love for the other person.
And as a result, they want to give them the biggest and best ring money can buy.
This is fine as long as you can afford it.
But if you have to go into debt to buy the ring, this is a problem.
Review your income, expenses, and savings and buy a ring that fits into your budget.
This will allow you the ability to continue to save and live comfortably as you move into the chapter of your lives.
#15. Not Involving Your Partner In Money Talks
A big issue after you are married is only having one person handle the money.
While it is fine if one spouse is more interested in balancing the budget and making sure the day to day finances are in order, the other spouse can’t be left in the dark.
They need to be updated regularly on where things stand.
Even if they have zero interest in personal finance, it is important to at least give them a basic overview.
This will lower the chances of money fights when they want to go on a big vacation and then find out it isn’t possible because money is tight.
#16. Going Into Debt For Your Wedding
Money is a leading cause of divorce, so why throw a huge wedding that you have to into debt for?
When you do this, you are setting yourself up for failure.
You enter the marriage with a huge monthly debt that you have to now pay off.
This could delay the purchase of your home, delay having kids, or even deny you from switching jobs because of the salary.
No one will think less of you if you have a basic wedding instead of a huge wedding.
Your guests are there to enjoy seeing you start your lives as a married couple.
They aren’t there to see amazing centerpieces or the other ways you can spend money on the event.
#17. Buying The Minimum Insurance
Let’s face it, no one likes to pay insurance premiums.
However, the repercussions of not having insurance can often be worse than the regular insurance payments themselves.
For example, if you don’t have a health insurance plan and you get injured, the out-of-pocket costs can be massive, plunging you into debt in no time at all.
If you don’t have insurance for assets like your car, the same thing applies.
Insurance is designed to protect you and your wealth, even if it doesn’t shield you from all the costs that you may encounter when your assets or you are put in harm’s way.
Instead of buying the minimum insurance coverage, work to find the policy that fits your needs first.
Then you work to find the lowest priced option from that list.
This ensures you have the right amount of coverage and you are paying the least amount in premiums as possible.
And when it comes to your auto or homeowners insurance, consider looking into Insurify.
They allow you to get multiple free quotes at once and will even switch your policy for you if you find a better deal.
The average user saves close to $500 a year!
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#18. Ignoring Disability Insurance
You hear a lot about life insurance coverage, but you hear very little with regard to disability insurance.
But the reality is you are far more likely to get injured and not be able to work than you are to die prematurely.
So not looking into disability coverage is a foolish mistake.
Each person has to figure out how much coverage they need.
For example, if you are somebody that makes $100,000 a year and your injury prevents you from working for two years, what would that do for your lifestyle?
How long can you rely on savings to last before you have to use it just to pay the bills?
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#19. Not Having Life Insurance If You Have Children
If your family relies on your income, it makes sense to take out a life insurance policy so they can be cared for in the event you pass prematurely.
For most people, taking out a term life policy is the smartest move.
The monthly premiums are low and you only pay for it as long as you need it.
For example, when you children are grown and are not dependent on your income, you don’t have a big reason to have life insurance.
Of course, each situation is different so there can be valid reasons for still having coverage.
But if you have kids and don’t have a policy, you are risking their financial well being.
#20. Not Having A Will
If you die without will, your assets are passed down on how the law sees fit.
This means family members you didn’t intend on having your assets could be fighting one another over who gets what property or money.
On top of this, they may not be getting the right amount of money to properly care for your children.
Whether you want them to go to private school or not, never having a will could mean your kids only get the bare minimum when it comes to what they need.
All it takes is sitting down with an attorney and drafting up a basic will to ensure everything goes as planned if you pass away.
#21. Buying New Cars
Always buying new cars is a financial mistake that will hurt you.
Especially if you buy new every couple of years.
This is because a new car costs a lot of money and when you sell it, you sell for less than you bought it for.
Repeat this cycle over and over and you are basically throwing money away.
The smartest move is to buy a gently used car that has low mileage.
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Sure, you are not getting the newest model of whatever make or model you are looking at, but you are still driving something of quality without the expensive price tags.
Plus you are saving thousands of dollars in the process.
And once you do this, make it a point to keep driving the car for longer than you normally do.
Try to get 10 years out of it.
If you can do this, you will see a change in your financial situation.
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#22. Spending Based On Your Emotions
One of the biggest mistakes people make when it comes to spending and their finances is they base what they purchase on their emotions.
When you feel down and out, instead of trying to cheer yourself up with fancy things, try to find a free activity or do something that cost no money at all.
Instead of seeing a movie in theaters which will run you $15, go to the library and check out a book.
Instead of buying that new dress for $50 at your favorite store, buy some flowers from your local farmer’s market for $5.
Or if you are hungry, don’t go grocery shopping as you will give into temptation to buy everything that looks good.
If you do this habitually, you will notice you have more money in your checking account and will make it easier to save money.
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#23. Not Considering The Value Of Your Time
Where you spend your money, time is equally as valuable.
Particularly when it comes to commuting and/or travel time.
For example, if you work a job that requires you to commute for one hour each way, that means you spend two hours getting to and from work every day.
That’s an entire extra work day each week you are spending commuting.
How can you use this time to benefit you?
Maybe you can listen to podcasts or audiobooks.
If you take public transportation, you might be able to read or work on a side hustle.
Another way to value your time is to look at things around your house that you can outsource.
Maybe it makes sense to pay someone to mow your lawn.
The hour it takes could be spent with your family or doing something that earns you an income.
If the lawn service costs $40 and you can earn more than this or your time with your family is worth more than this, then it makes sense to pay someone to mow.
#24. Not Willing To Pay For Professional Help
Too many times we see spending money as a negative thing and don’t look at the benefits of it.
A simple example is a new HVAC unit for your house.
When you need one, you usually don’t think about being warm in the winter or cool in the summer, you look at the cost and that stings.
The same is true when it comes to hiring a financial advisor or paying a CPA to file your taxes.
Yes they cost a lot, but look at the benefits.
The CPA is going to find all the ways to help you lower your tax bill, potentially saving your thousands of dollars.
A financial advisor will help you create an investment plan and keep you invested during volatile markets, which can grow your wealth to a lot more than if you tried to invest on your own.
You need to look at the benefit of the service and then determine if it is worth it.
You can’t just look at the initial cost and say no.
#25. Not Taking Care Of Yourself
This might sound odd to include this in a post about your financial life, but as you age, healthcare expenses will increase and can easily destroy your finances.
All the hard work you did to save and invest can be wiped away if you have to go into assisted living or need in home care.
While you can never prevent these things from happening completely, you can lower the odds if you take care of yourself.
Eat a healthy diet, exercise, and get enough sleep every night and you can lower these costs.
This isn’t to say you can never enjoy pizza or a hamburger, but try to be healthier more often than not.
Final Thoughts
These are the most common ways you can ruin your financial life.
It is critical you don’t make these mistakes.
And if you have, you need to start taking the steps to fix the damage you have done.
You won’t be able to overcome them all overnight, but you will never overcome any if you don’t at least try.
So pick one area of your finances that needs improve and go from there.
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I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.