5 Money Mistakes Even Financially Savvy People Make

Cindy Lamothe  Thu, August 1, 2024  GOBankingRates

No matter how great you are at managing your finances, no one is immune to making the occasional money mistake — and some of these can be dire.

“It’s important to recognize that some seemingly minor errors can have significant long-term effects,” said Michael Ashley, finance expert and founder of Richiest.

While everyone has financial blind spots, the good news is you can learn about them before they cause you problems. Here are some of the top money mistakes even the most financially savvy folks make.

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Neglecting to Regularly Review and Adjust Financial Plans

One common mistake, according to Ashley, is neglecting to review and adjust your financial plans regularly. “Many people assume that once they’ve set up a budget or investment plan, they don’t need to revisit it.”

However, changes in income, expenses or life circumstances can render old plans obsolete, potentially leading to missed opportunities or financial shortfalls.

Underestimating Small, Recurring Expenses

Another frequent issue is underestimating the impact of small, recurring expenses.

While a small subscription service or daily coffee might not seem like a big deal, Ashley said these expenses can add up over time and erode savings if not monitored carefully. “This can be particularly damaging in the long run, as the cumulative effect of these small expenditures can be substantial.”

Failing To Diversify Investments

According to experts, some people also make the mistake of relying too heavily on a single investment or income source.

“Diversification is a fundamental principle of financial management, and failing to spread out investments or income streams can leave you vulnerable to market fluctuations or job loss,” said Ashley.

He explained this lack of diversification can result in significant financial risk and instability.

“Truth is, thinking that you are good with money is one of the easiest ways to let your guard down and put yourself in a situation where you steadily miss out on financial advancement opportunities,” said Mafe Aclado, finance expert and general manager at Coupon Snake.

In her experience, one of the most common money mistakes people make — even when they are generally good with money — is failing to diversify their investments. Particularly frugal people, for example, have some good habits, like avoiding impulse spending, but they also avoid all but the most familiar and safe investments.

She said these people lay all their financial eggs in one basket. “And what makes this a huge money mistake is by concentrating all their investment[s], they run a huge risk of loss if the investment performs badly.”

https://www.yahoo.com/finance/news/5-money-mistakes-even-financially-160055894.html