'Bad with money'? Common financial mistakes you may be making & how to fix them

If you're wondering how to get better with money, you're not alone. Nearly one-third of Americans don't feel good about their money situation, according to recent Federal Reserve data.

Whether you're not earning enough to make ends meet, overspending or just aren't sure how to get ahead, there are financial habits you can form to get and stay on track. Let's take a look at common money pitfalls and how you can overcome them.

No matter your age or how much you earn, it can be easy to mismanage money. Avoiding or recovering from these money mishaps will help you do more with what you have and feel more confident in your finances moving forward.

Are you trying to do everything with your money at once? Or maybe you're constantly trying the latest personal finance challenge only to feel like you've made no progress. Should you stop dining out, cut back on coffee and download more coupon apps? Without financial goals and values, you're wandering in the wilderness, unsure of where to go or how to get there.

• Financial habit to build: Define your north star by uncovering your values and setting clear financial goals. This helps you align your financial decisions with your values, such as saving for retirement, building an emergency fund or giving to your favorite cause. Identifying them and revisiting them often will help you focus on what's important so you can feel confident about your money management.

Having some optimism can be good and helpful, but excessively relying on luck doesn't usually pair well with financial stability. Most people don't expect to get sick or injured, or figure that they'll cope just fine if an unexpected expense comes up. But the fact is more than 35% of Americans don't have enough to cover a $400 emergency expense, let alone get by for a few months without their current paycheck.

When you don't have a safety net, you risk taking on debt or struggling to make ends meet, both of which can be a big threat to your financial security.

• Financial habit to build: An emergency fund should be a top priority. It's considered ideal to save enough to cover at least three to six months of your expenses—more if you have a variable income. Use any savings strategy that fits your budget and lifestyle, such as a set monthly automatic savings deposit from your paycheck or banking account. Consider using high-yield savings, money market and other interest-bearing accounts to help your money grow steadily. Start where you can so an unexpected cost or event doesn't set you back.

Overspending makes it hard to reach any financial goal. If all of your money goes toward things you want now, there's usually little, if anything, going toward saving and investing for the future. The trouble is many of us are unaware of how much we're actually spending.

• Financial habit to build: Whether it's lifestyle creep (spending more as you earn more) or living beyond your means (spending more than you earn), your money needs guardrails. A budget helps you know where your money goes so you can live within your means and create room for longer-term goals that will move you forward.

When you're drowning in debt, financial progress can feel impossible. "Bad" debt in particular, such as high-interest loans and lines of credit, can be difficult to pay off entirely because the longer you have them, the more they cost you. Living off credit cards and letting large balances linger can leave you paying hundreds of dollars in interest—money that could be going toward your savings.

• Financial habit to build: If you use credit cards, strive to pay off your balances monthly. And don't forget the importance of savings. It's critical to put away some money for the future even while paying down debt.

Your credit health is important if you plan to buy a home or a car or even rent an apartment. If mismanaged or completely neglected, your credit may signal to lenders that you're a risky borrower. This results in higher interest rates and less favorable terms.

• Financial habit to build: Familiarize yourself with your credit report to understand what's impacting your credit score. Staying on top of changes to your credit can also protect you from identity theft.

Young African-American man is works on laptop at home

A young man is working from home on his laptop

Are you setting the right financial goals?

Making money goals that are specific, measurable, achievable, relevant and time-bound can give you confidence in the future.


Learn how to set SMART financial goals

Saving for retirement using an employer-sponsored plan has several advantages. One of the biggest benefits is an employer match, where your company matches all or a portion of your contribution up to a percentage of your salary. Turning down the match is like turning down free money, and it stifles your money's potential to grow with compounding interest.

• Financial habit to build: If your budget is tight, start with small contributions to your 401(k). Prioritize contributing at least enough to take advantage of an employer match if it's offered to you. Although it's never too late to save for retirement, the earlier you start, the more earning potential you give your money.

It's natural to want to give your children the world and fund their big goals, like paying for college. But in many cases, saving for college is done at the expense of parents' financial security. Over half of Americans choose to save for their kids' college over saving for their own future.

• Financial habit to build: If you'd like to save for your child's education, do so. But make sure it fits within your budget and does not become your only priority. Be sure to also set aside money for emergencies and for your own retirement years.

It's not fun to think about the possibility of your health deteriorating or being unable to earn money because of an illness or injury. But ignoring or deprioritizing these uncomfortable scenarios means you're not protecting yourself and your loved ones. Without insurance (or not enough insurance), one unfortunate event can snowball into a long-term financial struggle.

• Financial habit to build: Insurance can protect your assets and ability to earn income. It's worth speaking with a financial advisor to determine what kind of protection you need—life insurance, disability insurance or long-term care insurance—and how it can fit into your budget with your other financial goals.

If you're concerned with your money management skills, you can take small steps now to build healthier habits and, in turn, create a strong financial foundation. The strategies you adopt today can help you avoid common financial mistakes or bounce back from them. As you form a plan, a Thrivent financial advisor can help—providing expert advice to guide you along the way.