1. Impulse purchases
Have you ever gone to a big box store to purchase socks and cleaning supplies only to somehow wind up with a $150 receipt?
If you tend to fall victim to impulse purchases, you're in good company. A good 29% of Americans make at least one unplanned buy per week, says market research firm Provoke Insights.
Unfortunately, those unplanned purchases could be busting your budget and preventing you from meeting your savings goals.
To avoid them, aim to shop with a list. The simple act of writing one up might help you hold yourself more accountable. And if that doesn’t work, find a shopping buddy who can keep you in check.
If all else fails, forgo the temptation to earn credit card rewards and only shop with cash. If you only have enough money to buy the things you came for, you can’t overspend.
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Read More2. Peer pressure
When your friends throw caution to the wind and splurge on various experiences, it can be tempting to join them — especially if they pressure you to do so. But unfortunately, peer pressure, or a desire to please others, could get in the way of your savings goals.
A good 39% of Americans say they’ve spent more money than they could afford to impress another person, according to Lending Tree. It’s a habit you need to break if you want to grow your wealth.
Start by setting ground rules with the people you know. If you plan a night out, state your budget from the start and stick to it. Also, stay off social media if it prompts you to spend beyond your comfort zone.
3. Credit card debt
During the second quarter of 2024, the average U.S. credit card balance reached $6,329, according to TransUnion. But the more credit card debt you have and the longer you carry a balance, the more money you inevitably spend on interest. That’s money you could be saving or investing instead.
Sticking to a budget is a good way to minimize credit card debt. Use a money management app or spreadsheet to track your expenses, and then be prepared to make adjustments as needed.
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Learn more4. Expensive cars
According to Cox Automotive, as of September 2024, the average new car transaction price was $48,397. The problem is that many consumers can’t afford new cars but insist on buying them anyway. Worse yet, many people spend extra on added car features that drive their costs upward.
If you’re spending more than 20% of your income on your vehicle, you may be seriously limiting your ability to save money. Remember, unlike homes, which tend to gain value over time, cars commonly lose value as soon as they are driven off the lot.
This isn’t to say you should overspend on a home, either. But be especially careful to keep your vehicle costs at a comfortable level.
5. Conservative investment portfolios
Investing money in the stock market certainly carries risk. But if you stick to conservative investments such as certificates of deposit (CDs) or bonds, you take on another risk — falling short of your financial goals.
Imagine you invest $300 a month in a bond portfolio over 30 years. At a yearly 4% return, you’re looking at a total value of about $202,000. But if you invest the same $300 a month in a stock portfolio at a yearly 8% return, a bit below the market’s average, you’re looking at $408,000 instead.
It’s natural to be skittish about buying stocks, but investing over the long term helps mitigate the risk of losses because you have the time to ride out market downturns.
Diversifying your portfolio can also lower your risk as an investor. Aim to invest across various companies, industries, and global markets.
If you’re uncomfortable choosing individual stocks, you can simplify the process by purchasing index or exchange-traded funds (ETFs), which invest in the broad market for instant diversification.
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