I’ve been noticing a lot of money habits that everyone treats as ‘normal’ but might actually hurt in the long run like overspending on small things, relying too much on credit, or not saving early. Curious what others think… what’s one ‘normal’ financial habit you believe is actually a big mistake?
What’s the biggest financial mistake people think is ‘normal’?
byu/Delicious-Line5549 inpersonalfinance
Posted by Delicious-Line5549
9 Comments
New Car. Most people really just gaslight themselves into buying something they can’t really afford.
Agree with /u/kenzakan. Car seems to almost always be the biggest isssue
Not even just new but just too expensive for where people are in life
I’ve had multiple friends who want or have kids jump at a “great” home purchase, only to realize the school zoned for their kids is not anything that they wanted, and either needed to move or go private.
As someone fastidious about resale value and the lack of liquidity, I made sure to weight the schools zoned for my home purchase, and received full price offer in less than 24 hours after first day of open house.
Financing depreciating assets. You take something that’s already loosing value and overpay for it by way of interest charges. People focus their monthly budgets around payments. They think if they can afford the monthly payment, they can afford it. This is how people figure out their mortgage budget, their vehicle budget, etc. Buy as few depreciating assets as possible and pay cash for them. Don’t buy more car than you need and don’t trade up more often than necessary.
You named the #1 issue in your sentence…all the small things. People would stop to pick up a $100 bill but they think nothing of buying work at lunch every day or doordashing supper a few times weekly. Over the course of just 1 month stopping those things will save far more $100.
The other thing is they fail to differentiate between ” I can AFFORD this” and “I NEED this”
I am debt free and had to buy a new car this January. At this point in my life I am debt free and my kids just graduated and mived out. I could easily AFFORD a $75-100K car, but I don’t NEED that kind of car. So I bought a Toyota Corolla.
The common misconception that having a balance on a credit card is good to build credit.
Buying a new car and financing ANY car for more than three years.
Runner up: only investing enough in your employer workplace plan (like a 401k) to get the employer match and thinking you are “maxing out” your retirement.
Carloan for a new/luxurious car.
Paying off a loan on a rapidly depreciating item is idiotic from a financial standpoint.
A lot of people would financially be way better off with buying an old / 2nd hand car with funds at hand.
Treating insurance like “free money”. They’ll make a claim for a minor thing like a parking lot scrape or something. Sure they’ll get their <$1000 payout for whatever minor thing they had, but then they get a 20% premium hike for the next 3-5 years that adds to their monthly fixed expenses and makes things tighter.
<$1000 car or home repairs are things that should be self-funded via a healthy emergency fund. Insurance is for catastrophic losses, not minor inconveniences.