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Vault’s Viewpoint
- Most Americans today are living paycheck to paycheck and failing to save enough money.
- The most common financial mistakes can often be the most obvious, but that doesn’t mean they’re easy to overcome.
- 2024 can be the year that you reset your finances and work toward meeting short- and long-term money goals.
1. Not Following a Budget
Creating a budget is one of the best financial moves you can make for your household. It enables you to see where your money is currently going and how well you’re advancing toward your financial goals. It also allows you to make adjustments that fit your goals.
There are many types of budgets, including a 50-30-20 budget, which encourages you to put 50% of your budget toward needs, 30% toward wants and 20% toward savings. If you need help getting started, there are many budgeting apps that can simplify the process.
2. Impulsively Spending
Thanks to inflation and the after-effects of COVID, Americans are making fewer impulsive purchases than years prior. But this doesn’t mean that emotional or unexpected purchases won’t still creep up, and these have the power to completely derail our finances when they do.
Cutting out impulse spending might be necessary for your budget, but it also eliminates many of the frivolous purchases that could crop up over the course of the year. Instead of giving in to this temptation when it arises, transfer that money to a dedicated high-yield savings account. You’ll be patting yourself on the back later on, both for avoiding the purchase and for earning high annual percentage yields on your cash in the process.
3. Living Beyond Your Means
Recent data shows that the majority of American households are living paycheck to paycheck. This can be the result of unexpected expenses, hardships or even a recent rise in the cost of living. And these factors can lead to us being forced to live beyond our means.
Living beyond your means involves spending more than you earn, or disproportionately spending in areas where you can’t really afford to spend. This can also be where a solid budget shines, showing you which expenses to cut out and identifying areas of overspending.
If you seem to be living beyond your means, you may be able to adjust your budget or even downsize to eliminate extra expenses. Then, stick with the budget you created in step one so you don’t overspend in the future.
4. Not Saving for Retirement
Retirement is one of those financial goals that seems so very far away…until it’s not. Combine that with the power of compound interest and investment returns, and it’s easy to see why saving for retirement today is important if you want to have a successful tomorrow.
If you are offered a workplace retirement account, such as a 401(k), spend some time analyzing your investment options and allowed contribution limits. If a workplace plan isn’t available—or you’re self-employed‚ you can always open and fund a personal portfolio or even an individual retirement account (IRA) on your own.
5. Neglecting Your Emergency Fund
If you were to encounter an unexpected expense tomorrow—whether it’s a big home repair, medical bill or even a job loss—would you have the cash available to cover it? Without an emergency fund, you could find yourself turning to high-interest forms of debt, such as credit cards, to cover the expense.
Instead, make this the year that you establish and build an emergency fund. Aim to initially set aside $1,000, with the end goal being three to six months’ worth of expenses.
6. Accumulating Debt
The average American household is in more debt than ever and the trend shows no signs of slowing, especially with unprecedented rates of inflation and rising household expenses. But allowing yourself to accumulate debt this year can be a costly mistake.
Instead, use your budget to reduce spending and avoid taking on new debt as best you can. Find ways to reduce household expenses or increase your income (or both!) rather than using credit cards or taking out a personal loan.
7. Paying Interest
If you have a home mortgage or auto loan, you likely can’t avoid finance charges entirely. But for 2024, you can make it a point to avoid as much interest as possible, or at least not accrue any new interest.
To boost your efforts, consider ways you can limit (or even eliminate) the interest charges you’re already paying. Can you refinance your auto loan into a lower-interest loan? Or maybe a 0% APR balance transfer would allow you to pay off your credit card balance without any new interest charges.
8. Paying Unnecessary Fees
Late fees, processing fees, monthly maintenance fees, overdraft fees, credit card annual fees… these may just feel like $20 here or $45 there, but they can add up to hundreds or even thousands a year. Make 2024 the year that you eliminate all unnecessary fees from your financial life and save yourself a ton of money in the process.
You can avoid overdraft fees and monthly maintenance fees by opening a free checking account that either doesn’t charge overdraft fees or allows you to link a savings account for overdrafts.
Set your credit cards and other bills on autopay so you never miss a payment. And definitely spend some time looking at the credit cards you carry and whether they’re worth the annual fees they charge.
In some cases, using all of your card benefits can easily make up for the yearly cost. In other cases, you may want to consider switching to a no-annual-fee credit card instead, to save money and still unlock the rewards and benefits you want most.
9. Not Negotiating Bills
Did you know that you should be negotiating most of your bills each year, if not more frequently? This could save you hundreds of dollars. There are even money-saving apps that can help you negotiate bills.
Some bills you should always try to negotiate include your utilities (water, electric and natural gas) and household services (cellphone, cable, landscaping, home security and trash pickup). You might be surprised by what you can negotiate and how much you can save.
10. Not Revisiting Your Insurance Coverage
Make sure to analyze your insurance coverage, whether that’s your homeowners policy, renters coverage, auto policy or even valuable personal property coverage.
Consider whether your current limits are still right for your situation; if you need more or less coverage, adjust accordingly. Changing your policy deductible can be a great way to lock in financial security and impact your premiums too.
11. Paying for Subscriptions You Don’t Need
According to a study by C+R Research, the average American spends $219 per month on subscriptions—which is more than 2.5 times the amount they would estimate they are paying.
That’s thousands of dollars each year on recurring products and services. And many of us may be paying for subscriptions that we neither need or even remember having.
Go through your credit card statements and email to identify which subscriptions you have going and how much you’re paying. Subscription tracking apps can help. Then decide which ones you need, which ones to cancel and which ones you may be able to get a better deal on.
12. Ignoring Your Credit
Even if you aren’t planning to use your credit anytime soon, you should always keep it in great shape. That way you have a strong credit history to pull from if you decide to open a new rewards credit card or have an opportunity to refinance your home or auto loan. Your credit score can also influence things like your auto insurance premiums.
Make sure that you are always making payments on time, limiting new credit inquiries, and keeping an eye on your credit utilization. Even if you don’t need to lean on your credit history today, this will keep it healthy and ready to go for when the situation arises.
13. Not Saving for the Holidays
It’s never too early to start planning for end-of-the-year expenses, like holiday gifts and travel. According to the National Retail Federation (NRF), Americans forked over a record-breaking amount in 2023 on retail spending, and are projected to do the same in 2024. Rather than fall into holiday debt, start saving now.
The easiest way to do this is to set up a dedicated high-yield savings account that offers a 5% or higher APY and automate your monthly contributions so you don’t even have to think about it. Come the end of the year, you can use this cash toward your holiday expenses.
Frequently Asked Questions
What Is the Most Common Financial Mistake?
The biggest financial mistake most people make is not having a solid budget. Your budget is your financial roadmap, and failing to establish and follow one is a surefire way to overspend, lose track of your progress, and even fail at meeting your financial goals.
What Is a Financial Pitfall?
A financial pitfall is a mistake people make with their personal finances. These pitfalls don’t just have a negative impact on finances. They can grow out of control and impact your health and well-being. Common financial pitfalls include:
- Impulsive spending
- Not following a budget
- Not having a savings or emergency fund
- Taking on excessive debt
Are most Americans living beyond their means?
According to a recent PYMNTS study, nearly half of high-income consumers today are living paycheck to paycheck, and nearly 70% say that they feel financial stress and/or insecurity about a lack of savings.
Rather than sticking to a clear budget, reducing expenses and allocating funds toward savings, these households often overspend or live beyond their means in one or more categories. Doing so isn’t just stressful, but it can derail future financial goals and progress toward savings.
Article sources
At Newsweek Vault, our team of dedicated writers and editors are not just experts in their respective fields but also committed to delivering content that meets the highest standards of journalistic integrity. We analyze primary sources, including peer-reviewed studies, authoritative government sites and insights from leading industry professionals and ensure that every piece of information is researched, fact-checked, and presented with accuracy and relevance.
- Americans Are Spending Less on Impulse Purchases in 2023 Than in Prior Years, According to Annual Survey Commissioned by Slickdeals. PRN Newswire. Accessed on March 8, 2024.
- Metlife’s 21st Annual U.S. Employee Benefit Trends Study. MetLife. Accessed on March 8, 2024.
- Subscription Service Statistics and Costs. C+R Research. Accessed on March 8, 2024.
- New Reality Check: The Paycheck-to-Paycheck Report — The Supplemental Income Edition. PYMNTS. Accessed on March 8, 2024.
