How to Avoid 8 Foolish and Costly Financial Mistakes

Better Investing

What's Hot

2 Types of Black Marks Might Vanish From Your Credit File SoonBorrow

6 Ways the Obamacare Overhaul Might Impact Your WalletInsurance

7 Dumb and Costly Moves Homebuyers MakeBorrow

This Free Software Brings Old Laptops Back to LifeMore

Obamacare Replacement Plan Gets ‘F’ Rating from Consumer ReportsFamily

Beware These 12 Common Money MistakesCredit & Debt

21 Restaurants Offering Free Food Right NowSaving Money

17 Ways to Have More Fun for Less MoneySave

House Hunters: Beware of These 6 Mortgage MistakesBorrow

30 Household Uses for Baby OilSave

25 Ways to Spend Less on FoodMore

Nearly Half of Heart-Related Deaths Linked to These 10 Foods and IngredientsFamily

5 Surprising Benefits of Exercising Outdoors in WinterFamily

10 Ways to Save When You’re Making Minimum WageSave

Boost Your Credit Score Fast With These 7 MovesCredit & Debt

7 Painless Ways to Pay Off Your Mortgage Years EarlierBorrow

The Most Sinful City in the U.S. Is … (Hint: It’s Not Vegas)Family

The True Cost of Bad CreditCredit & Debt

10 Companies With the Best 401(k) PlansGrow

This Scam Now Tops ID Theft as the No. 2 Consumer ComplaintFamily

6 Stores With Awesome Reward ProgramsFamily

6 Ways to Save More at Lowe’s and The Home DepotSave

6 Healthful Treats for Your DogFamily

New Study Ranks the Best States in the U.S.Family

Thousands of Millionaires Moving to 1 Country — and Leaving AnotherGrow

Strapped for College Costs? How to Get the Most From FAFSABorrow

6 Overlooked Ways to Save at Chick-fil-AFamily

Ask Stacy: What’s the Fastest Way to Pay Off My Mortgage?Borrow

Where to Sell Your Stuff for Top DollarAround The House

8 Ways to Get a Good Price on a Shiny New AutoCars

Ask Stacy: How Do I Start Over?Credit & Debt

Secret Cell Plans: Savings Verizon, AT&T, T-Mobile and Sprint Don’t Want You to Know AboutFamily

30 Awesome Things to Do in RetirementCollege

14 Super Smart Ways to Save on TravelSave

The Rich Prefer Modest Cars — Should You Join Them?Cars

You’ll Soon Pay More to Shop at CostcoSave

10 Ways to Save When Your Teen Starts DrivingFamily

These expensive mistakes can cost you thousands. However, you can sidestep such pitfalls if you are aware of them.


Everybody makes mistakes, but such errors are particularly painful when they cost you some hard-earned cash.

In the past, Money Talks News founder Stacy Johnson has written about his own money mishaps:

Confession time: I’ve blown it big on more occasions than I care to mention. In fact, most of what I’ve learned about money I didn’t learn in books or by being a CPA, stock broker, or financial reporter. I learned it the hard way — by making stupid decisions and missing opportunities.

As Stacy’s own list of 10 mistakes shows, nobody is perfect when it comes to handling finances. But even if errors are inevitable, there is no reason to waste hundreds or even thousands of dollars on financial moves that are proven folly.

Here are eight common financial fouls you can avoid just by exercising a little thought and a lot of prudence.

1. Borrowing to buy depreciating assets

Adam Gregor / Shutterstock.comAdam Gregor /

Problem: Your IOU becomes an OMG when a purchase loses value. That’s why the housing crisis was so devastating to many families. Everybody suddenly with an underwater mortgage — meaning they owed more than their homes were worth — learned this the hard way.

How to avoid it: Homes typically increase in value, although that’s not always true, as the Great Recession reminded us. Meanwhile, just about everything else loses value after you purchase it. Borrowing money to buy things that decrease in value — like cars — simply compounds the loss.

Ideally, credit should be used to buy only those few things that generally increase in value: a house, an education and maybe a business. If you’ve already dug yourself into a hole, check out “How to Pay off $10,000 in Debt Without Breaking a Sweat.” And if you want to buy those nice things without credit, try “Ways to Make Your Savings Grow Faster Automatically.

2. Buying a new car

George Rudy / Shutterstock.comGeorge Rudy /

Problem: Here’s how Stacy described new-car shoppers in “Why I Don’t Buy New Cars“:

If consumers want to feel smart, they comparison shop, kick a few tires, and talk to a few salespeople in an attempt to get a decent deal. But even if they drive the hardest possible bargain, that new car is still guaranteed to lose thousands of dollars in value before they can get it home.

How to avoid it: For starters, buy used, preferably from private sellers. To get a good deal, remember that there is something of an art to finding a great used car. Check out “8 Tips for Buying Your Next Car for Less” and “6 Things You Should Check Before Buying a Used Car.

3. Saving while in debt

Syda Productions / Shutterstock.comSyda Productions /

Problem: Savings provide a sense of security. But if you pay more interest on your debt than you earn on return on your investments, you’re going backward. One possible exception could be debt that comes with a tax benefit, such as mortgage interest or some student loans.

How to avoid it: As a rule of thumb, use low-interest savings to pay off high-interest debt. The reverse will gradually reduce your net worth. But don’t sacrifice peace of mind. If you’re in danger of being laid off or you anticipate a big expense on the horizon, retaining cash helps you sleep at night.

4. Buying name brands

michaeljung / Shutterstock.commichaeljung /

Problem: In some cases, name brands are worth the extra cost. But in other situations, brand names are no better than alternatives that can be purchased at a much lower price.

How to avoid it: Don’t pay for a popular brand’s advertising budget. When things are worth the extra money, pay it. But for many items — such as prescription drugs, salt and sugar, and many cleaning supplies — the generic is identical to the branded product. For more detail, see “12 Things You Should Always Buy Generic (and 4 You Shouldn’t).”

5. Ignoring your credit

Andy Dean Photography / Shutterstock.comAndy Dean Photography /

Problem: A good credit score is important because it affects interest rates you pay for loans, insurance rates, credit offers and even job offers. Yet many people don’t even bother to keep track of their score.

How to avoid it: Understand the cost of bad credit and take steps to improve yours. Take a few minutes today and get a free copy of your credit report at If your credit score is poor, study up on ways to get it in shape with “7 Fast Ways to Raise Your Credit Score.

6. Not asking for a better deal

goodluz / Shutterstock.comgoodluz /

Problem: When confronting a major expense, the asking price doesn’t have to be the price you pay. From doctor bills to credit card interest rates, the way to get a better deal is often as easy as asking.

How to avoid it: Always ask for a better deal. For ideas on how to haggle and get better deals across the board, check out “15 Ways to Never Pay Full Price for Anything.” Regardless of the activity, there are almost always ways to get a better deal, whether that’s awesome prices on vacation lodging or cheaper haircuts for the family.

7. Paying someone else to do what you can do yourself


Problem: Labor is often the most expensive part of home repairs and maintenance. Do you really want to pay the price for gardening, painting, car washing, mowing and cleaning?

How to avoid it: Save that money by doing many tasks yourself. In the process, you’ll gain the satisfaction of self-reliance. You may decide some DIY projects — making your own laundry and dish detergent or growing your own vegetables — are satisfying and worth the savings. On the flip side, consider that there are times to back away from DIY projects to save money and avoid catastrophe and injury.

8. Blowing tax refunds

flil / Shutterstock.comflil /

Problem: The average American receives thousands of dollars in tax refunds, according to the IRS. In February, the IRS reported this amount at $3,164. Many people either blow this money all at once or fritter it away.

How to avoid it: Remember that a tax refund is money you overpaid to Uncle Sam. It was your money when the IRS had it, and it is your money when you have it back in hand. Use it to pay down high interest debt or to fix the roof. Better still, “Use Your Tax Refund to Change Your Life.” But whatever you do, don’t squander it like lottery winnings

If you are getting a large refund, visit the IRS website to adjust what you are having withheld throughout the year. Get as close as you can to what you actually owe, because that refund is really not a bonus — it’s just money that you could have used better if it had been in your pocket during the course of the year.

We’d love to hear about your financial fouls, too. Share them in the comments or on our Facebook page.

Stacy Johnson

It's not the usual blah, blah, blah

I know... every site you visit wants you to subscribe to their newsletter. But our news and advice is actually worth reading! For 25 years, I've been making people richer without making their eyes glaze over. You'll be glad you did. I guarantee it!


Read Next: 8 Ways to Get Your FICO Score for Free

Check Out Our Hottest Deals!

We're always adding new deals and coupons that'll save you big bucks. See the deals to the right and hundreds more in our Deals section.

Click here to explore 1,902 more deals!