20 Careless Money Mistakes That Can Destroy Your Savings

The economy is chaotic now, with inflation making prices rise out of control and the threat of interest rates rising. That means it’s more important than ever to save money in case you need it in an emergency and for your retirement, no matter how young you are.

But just saving regularly may not be enough. You’re working hard and saving what you can, but if you’re making one (or more) of these money mistakes, you could be destroying your savings or getting into more debt.

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This is the “buy low, sell high” of personal finance, but it’s so true and so crucial to surviving financially anywhere on Earth. Every month, you have to bring in more money than you spend.

There are two ways to make sure this happens: Spend less over the month or bring in more money. If you don’t, you’ll be dipping into savings (or borrowing on a credit card) to pay your bills. Worse, you could burn through your savings and go into debt.

This is another classic piece of advice that is perpetually true. Figure out how much money you’re bringing in and how much can go out for different categories of expense, and then stick to that budget.

If you don’t write down what you can spend on each category of expense, it’s way too easy to spend more than you’re bringing in without realizing it until it’s too late.

If your parents offer to pay your expenses, you may feel like you’re in a great situation. But if you use them to fund your living and spend all your earnings instead of saving, you aren’t making progress, and you’re staying in the child role when you could be an adult.

Worse still, if your parents suddenly stop paying, you could be stuck making less than you spend and not having any savings.

If you’re able to pay all your bills on your own, and your parents offer you help that would allow you to save more, take it. It makes no sense to move out to an apartment you pay for if your parents are happy to let you live at home while you save for a down payment or are struggling to pay for everything.

As long as you can negotiate healthy emotional boundaries, accepting help can help you spend less and boost your bank account.

Everyone who is a working adult should be building up an emergency fund with three to six months worth of living expenses. If you’re not building up this fund, you’ll have to dip into your savings if you lose your job or can’t work for some reason.

Once you have an emergency fund saved, your savings can build up and earn interest over the long term.

People don’t want to spend money on anything without a guaranteed return, and insurance is paying for contingency.

But if you don’t have the cash coming in to be able to weather a huge medical bill, car accident, house fire, or theft, not having insurance to pay for those expenses could destroy you financially. It’s a small outlay for big protection.

It can be really tempting to just wing it and check your account balance occasionally at the ATM or online. But if you don’t know what’s coming in and out of your account regularly, you could be leaking money.

Auto payments for things you thought you’d canceled, fees and charges you didn’t know were being assessed, and false or repeated charges can all suck money from you. And if you don’t know how much money is in your account, you can overdraw and pay huge overdraft fees.

Some people put daily living expenses on credit cards to earn points on the money they spend to live. However, this strategy only works if you have the cash flow to pay off the balance on the card every month before it accrues interest.

If you find yourself putting expenses on a credit card that you can’t pay off every month, you’ll be adding to your debt and end up paying much more than the value of the original expense.

Pro tip: Some of the best balance transfer credit cards can help you pay down your credit card debt faster by offering you lower interest rates.

If you put all your savings in one investment type and it does poorly, you lose. It’s better to spread your money into different accounts — preferably held by the same financial planner or in the same blanket account — with different levels of risk and reward.

With this strategy, you can capture some of the benefits of riskier investments to grow your wealth while also maintaining stability in lower-risk investments.

One piece of repeated advice is not to put all your eggs in one basket. People sometimes interpret that to mean that they should be stashing money in all kinds of different accounts.

While it makes sense to keep your emergency fund in an account you don’t check regularly, having your money in too many places means you could lose track and not know how you’re progressing with your budget and savings. Simplify to keep track.

If you’re paying more interest than you need on debts like student loans, a car, or a house, you could be losing money you could otherwise be saving. Checking up on your loans and other debts to make sure you’re paying the lowest interest rate available is one of the best ways to crush your debt.

If you have multiple debts, such as student loans and car payments, it might make sense to work with a debt consolidation company. They could help you get a lower interest rate with a lower monthly payment than your current loans. You can then take the extra money and apply it to the principal of the loan or save it.

Keeping a high credit score will let you consolidate debt at a lower rate so you can save money by paying less interest. If you get sloppy with late or missed payments or too much available credit, your credit score will slide and you’ll end up paying more in interest across all your debts.

Stay vigilant about your credit score and it will save you money in the long term.

Even if your salary pays enough to cover your expenses and let you save, creating another income stream to make extra money is a smart idea.

The more you can save right now, the bigger that amount will grow over the next few decades so you’ll have more to retire on. Work a side gig now so you have more choice later about how you live.

Even if crypto or fad investments do give you a huge return in a short time, the disruption to your investing strategy may throw you off track and result in lower earnings decades down the road.

Stick with investments with a proven track record, or only invest money you’re happy to lose in the next big thing.

While it can make sense to take out a consolidation loan to keep all your debt in one place and pay a lower rate, you can’t actually borrow your way out of debt.

If you take out a loan but can’t consistently make the monthly payments, you’re not in any better situation than you were before. 

If you don’t pay attention to the latest financial news, you could be spending too much money or missing chances to protect or earn more money.

Current events affect stock prices, interest rates, supply chains, and prices of goods and services, all of which affect the amount of money you earn, spend, and save. Stay up on what’s happening in the world so you can make good decisions.

If you created a budget and investment strategy when you were in your 20s, and you’re in your 30s or 40s now, your needs have probably changed while your strategy has stayed the same.

You should be reevaluating your finances and saving and investment plan every year to make sure you’re still at the same level of risk. That way, you’ll be allocating your money in a way that makes the most sense for your situation.

Pro tip: The best investment apps can make it easier to explore ways to diversify and rebalance your investments.  

As you get older, you will have more responsibilities and less free time. Things like caring for children, aging and sick parents, and non-work obligations will take more and more of your time.

If you don’t build flexibility and stability in your earnings and investments to meet these obligations, you won’t be able to afford your life. Think of the next stage and work toward what you’ll need for that.

Getting sick and facing hospital bills or not being able to work can wipe out all your savings and leave you destitute with no safety net. You don’t have any choice about the genetic lottery and your predisposition to illnesses and conditions, but you can make choices to maintain as much health as possible.

Staying informed about your finances and about the world is the best way to maintain financial health and grow your savings. It’s also worth the time to research the best savings accounts to make sure you’re earning the most interest with low or no fees.

You should also be doing a review of your own financial situation every three months to make sure you’re on track. If you can avoid making the money mistakes we’ve talked about, you should be able to stay on the path to saving what you want for retirement.