13 Signs You're Worse with Money Than You Think

You might be in a good spot financially, but do you really know as much about money as you think you do?

Updated Sept. 24, 2024

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Life can feel a lot easier when your finances are all taken care of and everything is smooth sailing. But before you go patting yourself on the back for a job well done, make sure you review your financial situation and see whether you’re making any of these common money mistakes.

You can use this list to find out where you might have a blind spot when it comes to your money-management abilities. Once you discover these blind spots, you can work on fixing them. This will help you add to your knowledge about how to manage your money, and ensure you reach your personal finance goals.

So here are 13 common money mistakes you could be making right now:

Using your debit card for everything

Using a debit card for all your purchases can seem like a safe route because you’re using money you actually have in a bank account. With a credit card, you’re essentially borrowing money from a bank or credit union. So you might assume debit cards are safer and smarter than credit cards.

However, if you compare credit cards to debit cards and their potential fraud liabilities, credit cards are actually safer. Under the Fair Credit Billing Act, the most you could be charged if someone stole and used your credit card is $50, though most credit card companies won’t charge you anything. With the Electronic Fund Transfer Act, you could be liable for $50, $500, or all the money in your bank account if your debit card information is stolen and used.

Also, if you choose a debit card over a credit card, you’re missing out on easy cash back or travel rewards from your purchases. With the best rewards credit cards, you’ll earn valuable cash back, points, or miles on every purchase. Because you’re already making purchases every day, you might as well earn some rewards on them, right?

Not having an emergency fund

An emergency fund is savings that you put away in case of an emergency. You add money to it, but don’t touch it unless there’s an actual crisis. This may include losing your job, incurring an injury, or getting sick. If you were to face a potential financial emergency that could cost you thousands of dollars, would you have enough put away in an emergency fund to handle it?

To help build your emergency fund, make sure you use one of the best savings accounts to store your money. Traditional savings accounts won’t accrue much interest over time, which won’t help to grow your savings. Instead, look for a high-yield savings account to grow your emergency fund much quicker.

Borrowing from your next paycheck

It can be difficult to make it to your next payday, but borrowing money from a future paycheck is not the best way to make ends meet.

Using cash advance loans or putting all your expenses onto credit cards when you don’t currently have the money to pay off your debts are ways you can borrow from your next paycheck. You can easily end up in more debt from paying expensive fees and interest rates if you use these methods. At some point, you’re going to run out of breathing room and not have enough money to pay either your debt or your everyday expenses.

Instead, look into ways to move beyond living paycheck to paycheck. It could mean cutting your budget or picking up a side hustle, but there are things you can start doing today to change your financial outlook. If you find strategies to add more real cash into your finances, you won’t have to borrow money from upcoming paychecks.

Not investing

Long-term investments are meant to help you save money for retirement and other financial goals, but you have to start investing now if you want that money later. Because these types of investments are designed to grow over time, they don’t make as much sense and will likely make you less money the later you start in life.

If you’re worried about not having enough money or not knowing what you’re doing, consider using some of the best investment apps to get started. These apps make it easy for beginners to learn how to invest money and many of them don’t require much money to start investing. For example, you might invest in Tesla or Apple with just $1.

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Only having one source of income

Working a job and earning money is an everyday part of life, but you can’t always be fully reliant on one source of income. If your household depends on you and your income, where would you be financially if you lost your job? It’s a risky situation and one you don’t have to be in.

To help reduce your risk, consider looking into other revenue sources, like a side hustle. All of the best side hustles can be done while you’re working another job, and you might even have fun while you’re doing them. Most importantly, they’re great additional ways to make money.

Not paying attention to your credit score

Just being able to qualify for loans and credit cards shouldn’t be the final step in your credit building process. Millions of people have credit scores, but that doesn’t mean they have access to the best terms and rates on the market.

A good or excellent credit score can help you save money through better interest rates and loan terms, as well as increase your approval odds when applying for the best rewards credit cards, which typically come with perks and freebies.

To keep an eye on your credit and learn how to take steps to improve it, use a free tool like Credit Karma to regularly check your credit score.

Not taking advantage of 401(k) match

Your employer-offered 401(k) account is an important part of saving for retirement. As you contribute to your 401(k) each year, you’re building toward having enough money to meet your retirement goals.

Many employers offer 401(k) matching as part of their benefits packages, which means they’ll match your 401(k) contributions up to a certain amount or percentage. If your employer offers this benefit and you put money into your 401(k) each year, you’ll receive additional free money from your employer without having to do anything. If you don’t contribute anything yourself, neither will your employer and you’ll be leaving that free money on the table.

Paying too much for insurance

Whether it’s home insurance, auto insurance, or pet insurance, you should never overpay on your premiums. This doesn’t mean you shouldn’t have insurance, as it’s an essential expense. Rather, you shouldn’t be afraid to shop around to get the best deal on your insurance policies.

But you don’t have to contact every single company to compare quotes from different providers It’s a lot easier to compare price quotes from the best car insurance companies, for example, if you just use an online marketplace that can quickly pull up all the options for you.

Paying too much in monthly bills

If you’re paying for multiple subscriptions every month, you might not even be aware that you’re wasting money. Subscriptions may seem like small expenses when you have only one or two, but they can quickly add up as you sign up for more and more that seem inexpensive individually. At a certain point, you may even forget you have some of these subscriptions.

To help decrease your costs on monthly bills and recurring subscriptions, consider using a service like Rocket Money. Rocket Money can help you pinpoint where you can save money, whether it’s identifying and removing unwanted subscriptions or having an expert negotiate a lower bill on your behalf.

Not paying off your credit card in full every month

You may think it’s smart to use a credit card for earning rewards or for making purchases while waiting for a paycheck, but if you’re not paying your credit card balance off every month, then you’re likely getting hit with big interest payments.

If you’re making only the minimum monthly payment required by your credit card issuer, you may be paying mostly interest and very little principle. That means it will take a long time to pay off your debt and you’ll end up paying a lot more money than you actually spent on your purchases in the long run.

Instead, do your best to pay off your credit cards in full every month so you don’t accrue any interest. If you have to carry a balance because of a large purchase, make sure you do it on a 0% APR credit card.

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Not asking for a raise

Your employment is typically your primary source of income, so it often has the most direct impact on your finances. But when was the last time you asked for a raise?

If you want to increase your income and potentially improve your financial situation, you might consider asking for a raise. Of course, the process of getting approved for a raise will depend on the company you work for, but if you haven’t received or asked for a raise lately, you might be worse with your money than you think.

Not having a budget

You can’t be that savvy with your personal finances if you don’t know how much money is coming in and going out. Budgeting is the easiest way to see the amount of money you’re earning and what it’s being spent on. If you don’t know how much money you have or what you’re spending on, it becomes far too easy to overspend.

Keep your finances on your mind by creating a budget and seeing where your money goes. This will make it easier for you to stop spending money on things you don’t necessarily want or need in the bigger scheme of your financial goals.

Not reading the fine print

Do you understand how all the fees on your credit cards and bank accounts work? Have you ever been hit by a surprise fee before? If so, you likely need to read up on the fine print of the financial products you’ve been using.

Credit cards and bank accounts are services that come with terms and conditions you agree to when you sign up for these products. If you don’t follow certain rules, you could pay the price — in fees or things like penalty interest rates.

To avoid these unnecessary costs, be sure to carefully read over your agreement with your financial institution. Most of the time, the terms for bank accounts and credit cards are straightforward and easy to understand. And if they’re not, call your bank and ask any questions you have.

Bottom line

If some of the things on this list sounded familiar to you, it may be time to make some changes in your life to improve your financial health. It’s better to deal with issues like these right away instead of ignoring them. That puts you at risk of your money issues compounding and becoming worse.

Just remember that everyone has to learn about managing their finances, so it’s not a bad thing if you don’t always know as much as you think you do. Discovering you’re making a money mistake gives you an opportunity to improve and gets you another step closer to achieving your financial goals.