Worst financial mistakes to avoid in 2023

In the ever-changing landscape of the global economy, making sound financial decisions is more critical than ever. To help you navigate the fiscal terrain of 2023 and beyond, we have put together this list of the worst financial mistakes to avoid.

Last updated and fact checked:March 30, 2024

Financial mistakes to avoid: FAQs

Are watches and jewellery investments?

You can hold some of your wealth in luxury watches and jewellery. An excellent way to determine whether your watch is an investment is to check the brand and quality of the item. Watches from more reputable brands will likely be in demand for decades, so you can sell them at a higher price later. Cheaper ones will get damaged easily and are usually flooded on the market.

What is the best way of keeping track of expenses?

To track your expenses, you can start by segmenting your spending methods. Know how much you spend using your debit card, credit card, cash, and other methods. You can also use an expense tracker app to control your bills in real-time. Finally, committing to a budget can help you manage your expenses better.

What is a good example of lifestyle inflation?

Lifestyle inflation can be demonstrated by considering a college student who just got his first job. With the increased income, he would want to rent a bigger house and start eating better food regularly. In other words, things that he previously considered luxuries turn into necessities.

How can I come up with a realistic budget?

Start by calculating your net income to make a realistic budget. If you make the mistake of focusing on your salary, you will spend more than you can afford. It is also essential to set realistic short-term and long-term goals. You can then plan how you will save money to reach these goals.

Proper money management is essential to people of all ages. However, money mistakes can be more costly as you grow older. This is because you will likely take on more responsibility as you age. You will also be approaching retirement and need to figure out how to maintain your lifestyle once you stop working.

Let’s look at some lesser-known financial mistakes that will cost you a lot of money.

1. Buying low-quality jewellery and watches

It can be hard to resist a bargain when shopping for jewellery and watches. However, going for high-quality items more likely to appreciate in value over the years is more prudent. Luxury watches aren’t designed to fit the current trends, so you can be confident they will be timeless. One thing to check when choosing a luxury watch is the country of manufacture. Switzerland is famous for its strict watch standards, so buying items made partially or fully in the country can be a wise decision. You should also check the brand of the watch. Famous names like Ruger Dubois are likely to always be in demand, so the watch's resell value will be pretty high.

2. Succumbing to lifestyle inflation

Lifestyle inflation happens naturally to most of us. This basically refers to an increase in spending that coincides with increased earnings. Lifestyle inflation is insidious and can keep you living in a cycle of debt, even as your income grows. If you don’t keep track of this phenomenon, you will find saving for retirement and other financial goals difficult.

It is possible to avoid lifestyle inflation by setting up automated savings and investment amounts. Being conscious of this issue can make it easier to prevent it. If your income has risen recently, you should calculate the actual increase in disposable income. In many cases, you may not be able to afford much of a lifestyle change if you consider taxes and other necessary expenses. Prioritising experiences over material goods can also help you avoid lifestyle inflation. Instead of buying a bigger car, consider taking a vacation out of the country.

3. Failing to keep track of little expenses

It can be easy to notice the amount you spend on rent and car payments. However, minor expenses like magazine subscriptions, streaming services, and cab rides often go unnoticed. If you ever find yourself checking your statements to see what happened to your money, you likely have an issue with small expenses. Noting down your daily and monthly costs can help you manage your finances better and eliminate some unnecessary payments. This can help you save for retirement and boost your investments.

4. Leaving appliances on standby mode

Switching off appliances isn’t just good for the environment; it also helps to lower your energy expenses. When leaving the house, you should turn off your TV, Wi-Fi router, microwave, and all lights in the house. The UK government estimates that the average household can save around £70 on their energy bills by switching off appliances at the socket. You also need to note that older gadgets are less efficient than modern ones. The government has stepped in to make such items more environmentally friendly, meaning they waste less power when on standby mode.

5. Make sure you’re saving enough for retirement

To ensure you’re saving enough for retirement, you should avoid certain money mistakes. First, you should avoid buying cheap jewellery and watches. You must also pay attention to lifestyle inflation, as it can put you in constant debt. Finally, you should avoid leaving your appliances in standby mode.

Image Credit:Usman Yousaf at unsplash.com