31 Scary Financial Mistakes You Can Easily Avoid

Sure, ghosts and witches and spider webs can be scary. But if you've advanced beyond childhood, there are probably some other things that will strike more fear into your heart -- like an unexpected $1,700 car repair bill or not having enough money for retirement.

You can minimize these kinds of terrors by learning about scary financial mistakes that you can easily avoid. See how many of the following mistakes you're at risk of making or have already made -- and then take steps to keep moving forward toward your financial goals. 

ALSO READ: 3 Financial Mistakes That Will Haunt You for Decades

Boo! Did that scare you? This can scare you more: Failing to invest effectively for your retirement, perhaps because you don't appreciate the degree to which your future financial security depends on you and your preparation, is one of the worst financial mistakes you can make. Many of us get a financial wake-up call at some point in our lives, but no matter how old or young we are at the time, it's likely that we'll wish we started sooner. After all, our earliest invested dollars have the longest time in which to grow.

The table below shows just how powerful it can be to invest over a long time period:

Another lesson embedded in the table is that you can still make up for lost time, to some degree, by saving more.

Buying more house than you should is another scary mistake -- even scarier than a huge spider in the bathroom. It can be tempting when you're house-hunting to consider homes a little outside your budget, and over time you might permit your budget to stretch a little. Lenders can make matters worse, approving you for mortgages that are bigger than you should really take on.

Be sure to crunch your own numbers and see how big a monthly mortgage payment (along with taxes and insurance) you can afford, while still being able to pay for all your necessities (food, transportation, utilities, healthcare), all your desired luxuries (cable TV, travel, gifts, fun), and your various other important obligations, such as saving for retirement and your kids' college educations. The table below shows how much of a difference a home price can make on your mortgage payment. It's based on data from a Zillow mortgage calculator that includes taxes and insurance and a 5% interest rate for a fixed-rate loan. 

Another common blunder to make is to not have a very good idea of just where all your dollars are going. Fail to do so, and you may end up paying for lots of things without realizing it and paying more than you want to or should pay for lots of other things. Remedy this by jotting down what you spend every dollar on for a few months. Reviewing your checkbook register and credit card statements and bank account statements can help with this, and a little notebook you keep along with your wallet can be another help. Once you have your monthly expenses, multiply them by 12. Figure out what you spend on various categories throughout the year.

This exercise may help you realize that you're spending $180 per month on your cable company bill, which amounts to $2,160, much more than seems right. You might also see that your habit of going out for dinner frequently is costing you about $100 per week and more than $5,000 per year, a figure you can rein in. The more you know, the more control you'll have over your spending. 

Sure, asking for and receiving candy at Halloween is satisfying. But even better is asking for -- and receiving -- a raise at work. A recent survey from the folks at PayScale offered some surprising findings:

-- Only 37% of workers have asked for a raise
-- Of those who did ask, about 70% receive some sort of increase

Thus, there's a pretty good chance you haven't asked for a raise at your job, and there's a pretty good chance you'd get one if you asked. So ask!

Of course, there are good and bad ways to go about it, so be strategic. It can be smart to ask for about 10% to 20% more than you're currently earning. You may not ultimately get it, but at least you start with a significant goal. It also helps to deserve a raise, by being a hard and productive worker and a valued team player. 

ALSO READ: 4 Mistakes to Avoid When Asking for a Raise

Why buy your goblin juice and eyes of newt at full price when you don't have to? If you see all those coupons in your weekly circulars and you don't use them, or you don't seek out coupon codes and promo codes for various retailers when shopping online, you're leaving a lot of money on the table. If you pay just $20 more than you had to each week, whether online or at the supermarket or at a bunch of retailers, you're looking at more than $1,000 lost each year! 

With purchases at most major e-commerce sites, look for any available coupon codes before checking out. Sites such as retailmenot.com and couponcabin.com offer up lots of codes that might get you free shipping, 20% off your purchase, or some other great deal. At Amazon.com (Nasdaq: AMZN), you might park items of interest in your cart and then wait to be alerted when their prices fall -- or use a site such as camelcamelcamel.com, which will alert you to price drops at Amazon. 

You may be going through life paying more than you need to on all kinds of things, big and small. With weddings, for example, a typical cost is rather steep -- more than $33,000. But there are lots of ways to pay much less, such as having an afternoon wedding instead of an evening one and not having it in June. If you're about to plunk $2,000 down for a fancy new large-screen TV, consider holding off. There's a good chance that a year from now, that TV will cost several hundred dollars less. Or you might get a different TV that's nearly as great for much less. Are you upgrading your iPhone every year or two? You may be able to save hundreds of dollars by hanging on to your smartphones longer before replacing them. Sometimes they might just need a new battery. Even small splurges can add up -- such as if you're spending $5 on a fancy coffee every workday. That's $1,250 per year! Aim to be more aware of your spending and of how you might rein it in.

It's dangerous to ignore your credit score, as it can be hugely influential in your financial life. If your credit score is low, you'll likely be offered higher interest rates for a loans, making your monthly payments and total interest paid over the life of the loan much higher. In some cases, you may even have trouble securing loans in the first place! That can spell trouble when Halloween is around the corner and you need to buy an expensive new broom!

The table below shows the power of a strong credit score for mortgages, for someone borrowing $200,000 via a 30-year fixed-rate mortgage. Moving from one score group to another can save or lose you close to $10,000 or more -- so spend some time looking into how you might increase your credit score. 

Not using the credit cards that are best for your needs is another common blunder. For example, if you're mired in debt, you shouldn't focus on cash-back cards and should instead favor low-interest-rate cards and perhaps do a strategic balance transfer. And if you're not deep in debt, you would do well to seek out the best rewards cards or the best cash-back cards that fit your spending patterns. There are cards that offer anywhere from 1% to 2% back on every purchase, and some that pay up to 5% or 6% back on certain purchases, such as those at supermarkets or certain retailers. If you spend $250 per month at Amazon.com, for example, and earn 5% back on most purchases there, you'll essentially be spending 5% less while saving about $150 annually. If you travel a lot, your best bet might be a card that offers travel rewards and discounts. 

ALSO READ: 5 Reasons It Pays to Use a Credit Card

Halloween means lots of death-themed decorations and costumes, but death is something we should plan for at other times, too. Estate planning is not just for the rich. No matter how old you are, you need a will, and also, ideally, a durable power of attorney for finances, a living will, and a healthcare power of attorney (sometimes called a healthcare proxy). Not doing so can leave you connected to machines keeping you alive when you wouldn't have wanted that, or might leave the wrong person in charge of your affairs should you become temporarily incapacitated. Depending on your assets and how you wish to pass them on to loved ones, you might also look into setting up a trust. Don't put this off because you're still in your 30s or 40s. Plenty of young adults die, and few of them expected to. You probably know someone who died unexpectedly at a young age. Keep your listed beneficiaries up to date for all your financial accounts, too. 

Much financial grief comes from not being on the same page as your spouse. If you're diligently saving and investing for retirement, while your beloved is spending every available dollar and even charging things you can't afford, you're headed for trouble. It's best to have a mutual agreement of how money will be handled and to have joint goals you're working toward together. It's even best to coordinate your retirement plans, including when each of you plans to start collecting Social Security benefits. Married folks have more Social Security strategies available to them than single people do. 

Too many people shop for fun -- not because they actually need something. The folks at swap.com surveyed Americans last year and found that the average American shells out $1,652 per year -- "just to cheer themselves up." According to the survey, more than 22% of the typical American's shopping is for items that are not needed. Instead, many shoppers report that factors such as anxiety, boredom, and stress have them shopping for pleasure and spending an average of $70.60 about twice a month in this activity. You might save yourself a lot of money if you pause before every purchase and ask yourself if it's really necessary or if it's simply to make you feel good for a few hours.

Are you walking around with a heavy credit card debt burden? If so, it's probably stressing you out -- and rightfully so. Credit card debt tends to feature very high interest rates, with some cards charging close to 30% in interest! If you owe $10,000 and you're paying 30% on that, you're looking at an expense of about $3,000 per year -- in interest alone! It's hard to get ahead and save for your future when you're just trying not to fall further in the hole.

Pay off any debts with high interest rates before putting any extra money toward mortgages or student loans or even investments. And remember -- even though mounds of debt are very scary, it is possible to pay off your debt -- even lots and lots of debt. 

ALSO READ: 3 Reasons You Should Start Paying Down Your (High-Interest) Debt Now

A particularly insidious financial problem is when you have lots of recurring payments to make -- especially when many of them are being paid automatically without your noticing and when some of them are for things you don't even use or need anymore. For example, you might be paying $50 per month for a gym membership, while not going to the gym any more. That's $600 annually that you're losing. Maybe you're still paying for life insurance, when no one is depending on your income any more, as your kids are grown and your parents are self-sufficient. If you're paying $175 to your cable company each month but are streaming most of your entertainment, you may want to revisit that expense. Many automatic monthly charges get increased over time, too, without people noticing.

Spend a little time studying your bank statements and credit card statements to see what recurring bills you're paying. You may find that you can cancel some subscriptions or alter some others. Some people have found expenses such as newspaper subscriptions that they're paying for that are going to a previous address!

If you're living paycheck to paycheck, you're too close to financial disaster. This can happen if you buy things you can't really afford, such as with credit cards, and then can't pay the bills off in full. Take some time to figure out exactly how much money is coming in each month, and where it's going. Look for ways to save small or large amounts, and draft a budget -- a plan for your spending.

Be sure to have a list of your priorities, and to separate necessary expenses from optional, discretionary ones. Make paying off any high-interest-rate debt a top priority, along with having a well-stocked emergency fund and saving for retirement. Once all your necessary expenses are accounted for, you can see how much money is left for optional spending and treats. If you need to have a year of only spending on necessary items, do so, in order to get yourself to a safer financial place. Live below your means, not above them. 

Here's a massive financial error being made by the majority of Americans: not investing in stocks. Fully 54% of Americans are not invested in the stock market, per a 2017 Gallup report, which means they're not able to take advantage of the powerful wealth-building effect of stocks. (And yes, that number reflects not only investments in individual stocks but also in mutual funds and 401(k) accounts and IRAs. Ouch.

The chart below shows how much more effective stocks are at increasing the value of your money over time. The data is from Wharton Business School professor Jeremy Siegel, who has calculated the average returns for stocks, bonds, bills, gold, and the dollar, between 1802 and 2012:

The annualized rate for stocks from 1926 to 2012 (a period you might find more relevant to your life) was 9.6%, by the way, versus 5.7% for long-term government bonds. Indeed, Siegel's data shows stocks outperforming bonds in 96% of all 20-year holding periods between 1871 and 2012, and in 99% of all 30-year holding periods. Here's how much you can achieve with regular investments in the stock market:

You might be quite content at your current job, but if you want to maximize your earnings over your working life (which will also maximize your Social Security benefits, not to mention the amount you can sock away for retirement), you might want to think about moving on. Studies have shown that those who stay put for long periods earn less than those who hop from job to job every few years.

According to a report in Forbes, "Staying employed at the same company for over two years on average is going to make you earn less over your lifetime by about 50% or more." The folks at human resource management company Automatic Data Processing studied data related to some 24 million workers and found that workers get the biggest increases in their salary when they've been at their job for at least two years but not more than five years. And annual pay increases were recently an average of 48% higher for those who switched jobs, according to data from the Federal Reserve Bank of Atlanta.

ALSO READ: When Is It Time to Make a Major Career Change?

Even if you avoid buying a haunted house, you may face other scary things: Buying a home can be a confusing process, with plenty of room for errors. One blunder is getting a fixed-rate mortgage when an adjustable-rate mortgage (ARM) would serve you best -- or vice versa. If you're not planning to be in the home long, an ARM can make a lot of sense in today's low-interest-rate environment, as it will lock in low rates for a few years. ARMs typically give you a few years at an interest rate that's more attractive than those for fixed-rate loans, but then the rate starts being adjusted regularly, to reflect prevailing rates. So with a 5-1 ARM, for example, the initial rate will hold for five years before being adjusted annually. If interest rates are rising, your mortgage rate will rise, too.

If you think or hope you'll be in the home for many years or decades, though, it can be better to lock in a fixed interest rate for the entire long life of the loan -- especially these days, as interest rates are still quite low, historically speaking, and they seem to be rising. 

If you're willing to spend an hour or less each year making phone calls to insurers, you might save hundreds of dollars. Review your insurance policies each year, shopping around for better rates. Each insurer uses different formulas to determine their rates, and each probably will offer you a different price for the same coverage for your home insurance, car insurance, and other kinds of insurance. Different insurers might offer the best deal in different years. Keep an insurer's reputation in mind, too. Don't switch to one that's not rated highly.

Another way to save on insurance is to bundle your policies -- an insurer might give you a discount on all your policies if you have two or more policies with it. And consider increasing your deductible, too. The higher your deductible, the lower the monthly premium. The folks at valuepenguin.com looked at sample premiums at different deductible rates for a 34-year-old married man with a 2010 Toyota Camry and got the following results:

If you're busy trying to keep up with your neighbors, buying a new car like they did or remodeling your kitchen like they did, reconsider your actions. It's easy to look at your friends, family, and neighbors from the outside and to think that they're doing a good job managing their financial lives, but that's often not the case. Most Americans are actually in debt, per a report from Comet. Federal Reserve data shows average Americans between the age of 35 and 54 owing more than $130,000, while a different report reveals about 1 in 5 Americans owing more than they have in emergency funds.

So don't look at others taking expensive vacations or buying expensive cars and assume that they're doing fine financially and that you might want to do the same. There's a good chance that their finances are not very healthy. Remember that one thing that many millionaires have in common is living below their means, which often means shopping with coupons and driving old cars. If you have to compete with your neighbors, compete only on Halloween decorations.

Fees show up in many facets of your financial life. Banks charge fees, credit cards charge fees, mortgages charge fees... and so on. Be sure to always be aware of how much you're being charged and of what your alternatives are.

Consider mutual funds, for example. A typical managed stock mutual fund might have an expense ratio (annual fee) of, say, 1.1%, while you can be invested in an index fund that tracks the S&P 500 for 0.1% -- or less. Here's how annual investments of $10,000 would grow, if they averaged returns of 10% annually, with those two fees subtracted:

ALSO READ: How to Avoid 8 Common Credit Card Fees

It's not a secret that healthcare costs are steep. But we often ignore how big a role healthcare costs will play in our future, and we don't always plan for them. Fully 44% of retirees found that healthcare expenses in retirement were somewhat higher (27%) or much higher (17%) than they expected, per the 2018 Retirement Confidence Survey.

Just how much might you spend on healthcare? Well, a 65-year-old couple retiring today can expect to spend an average of $280,000 out of pocket on healthcare expenses over the course of their retirement, per Fidelity Investments. 

Yes, Medicare may take care of much of your healthcare, but as the Fidelity number above shows, it won't pay for everything. Be sure to read up on Medicare, lest it ends up costing you more than it has to. And look into Health Savings Accounts, too.

Next -- are you leasing a car, or are you thinking of doing so? Leasing, which is essentially renting, can make sense, financially, for some people in some circumstances, but in general, buying will cost you less than leasing -- especially if you hang on to that car for many years. Leasing can get you lower monthly payments, but you'll likely be making them every year. When buying a car, your payments are likely to be over after three to five years. Read up on buying vs. leasing and crunch your own numbers. See which option is best for you. 

Of course you'll buy home insurance if you buy a home. But if you're renting your home, there's a good chance that you're not buying renter's insurance. That would be a mistake, because even when you're a renter, things happen -- and your landlord isn't going to cover every loss. If your apartment is broken into, for example, and valuables are stolen, you'll need renter's insurance in order to get reimbursed for that. The average cost of homeowners insurance was recently $1,083 annually, per valuepenguin.com, while the average cost of renter's insurance was far lower, at a mere $187.

If you're not funding one or more IRAs every year and aren't making use of a 401(k) account available to you at your workplace, you're probably missing out on a lot of tax-advantaged retirement savings.

In 2018, you can contribute up to $5,500 to one or more traditional or Roth IRA(s) -- in total. If you're 50 or older, the limit is $6,500. With a traditional IRA, a $5,500 contribution will reduce your taxable income by $5,500 -- saving $1,320 on your tax bill this year, if you're in the 24% tax bracket. That money can be invested, growing on a tax-deferred basis until it's taxed when you make withdrawals in retirement. Even better for many people is the Roth IRA. With a Roth IRA, a $5,500 contribution has no effect on your taxes in the contribution year. But follow the Roth IRA rules, and you'll be able to withdraw all your contributions and earnings tax-free! If your Roth IRA swells to $300,000 over time, that can all be tax-free income in retirement.

Note that 401(k)s have much higher contribution limits -- for 2018, it's $18,500 plus $6,000 for those 50 or older -- so aim to contribute generously to them, at least enough to take full advantage of any available matching funds. That's free money, after all. 

ALSO READ: Here's What It Takes to Become a 401(k) Millionaire

Leaving your retirement up to chance means you're taking a massive risk in life. You may end up with far less than you need. Spend a little time determining, as well as you can, how much money you'll need in retirement and how you'll amass it. Plan for what your income sources will be, too -- such as Social Security, savings, pension income, and so on. Consider buying an immediate or deferred fixed annuity, as a good one will deliver regular income, potentially for the rest of your life. (More on that soon.)

Plan for more your non-financial retirement, too. Think about where you want to live or where it makes most sense to live, financially or socially. Know that many retirees find themselves bored, restless, or even depressed, so think about what you will do in retirement to keep busy, and whether you'll want or need to find a part-time job for a while.

Don't be afraid to consult a financial planner, either. This is such important stuff, and few of us really know enough about investing and financial planning. Don't just go with any financial pro, though. Ask around for references and perhaps choose a fee-only planner instead of a pro who may have conflicts of interest from commissions earned by selling you various products. You'll find some local pros at www.napfa.org.

If you're assuming that because you're only 25 and have no children that you don't need life insurance, you may be making a mistake. If anyone depends on you financially -- your partner, children, parents… even nephews or nieces -- you need life insurance. Think, too, of anyone who has cosigned any loan for you, such as your parents who might have helped you with school loans or a mortgage. If you expire ahead of schedule, you don't want to leave them stuck with repayments. We tend to ignore the possibility that we might die prematurely, but it happens to many people, and often by surprise. You don't necessarily need a multi-million-dollar whole life policy. A relatively inexpensive term policy can be just fine, lasting only as long as you need it.

This also means that if no one is depending on your income, you probably don't need life insurance. If you're paying for an unnecessary policy, consider canceling it. 

A big retirement risk is that you might run out of money before you die. Few of us have pensions these days, but any of us can create a dependable pension-like income stream by buying an immediate annuity (as opposed to the more problematic variable or indexed annuity). You may be surprised at how much income you can buy through an annuity -- and the amounts you're offered should increase whenever interest rates rise, too. Here's the kind of income that various people might be able to secure in the form of an immediate fixed annuity in the current economic environment:

A deferred annuity is also worth considering. It starts to pay you at a future point. A 60-year-old man, for example, might spend $100,000 for an annuity that will start paying him $1,032 per month for the rest of his life beginning at age 70.

Do you have a well-stocked emergency fund? If not, you're making a big financial mistake. We all need a plan for how we'll get by if life takes a nasty turn -- such as if we suddenly face a job loss, a costly illness, or an unexpected $1,600 car repair bill. Fully 28% of Americans are just one financial emergency away from disaster, with no emergency savings at all, according to a Bankrate survey, while close to half of survey respondents hadn't socked away enough to keep themselves afloat for three months.

Draining your retirement account to cover an emergency or charging the expense on a high-interest-rate credit card is a bad plan, so stock an emergency fund with about six to 12 months' worth of living expenses, including rent or mortgage payments, food, utilities, transportation, taxes, insurance, and so on.

ALSO READ: 23% of Americans Have No Emergency Fund

If you're not regularly reviewing the financial statements you receive -- for your bank accounts, credit card statements, etc. (not to mention receipts) -- you're probably losing some valuable dollars. A review of your credit card bill, for example, may yield some surprise charges. Some may be due to fraud, but many may be ones you authorized long ago and forgot about, such as subscriptions to magazines you no longer want or read or a gym membership you never use. Some may be charges you once authorized that have doubled in size over time.

You may find that a hotel you stayed at has charged you for items you never consumed from the fridge in the room or for phone calls you never made. Hospitals have been known to charge you for some additional expenses beyond the main bill you paid, too. Many parties rely on your never looking closely at your credit card statement -- especially for relatively small charges.

Check your credit report at least annually, too. If it contains wrong information about your accounts and payment history, your credit score may be lower than it should be. You're entitled to a free copy of your credit report annually from each of the three main credit agencies -- visit AnnualCreditReport.com to order yours -- then check it for errors and fix any that you find.

This may seem like a minor thing to do, but it's really quite vital. If you raise your kids with an appreciation for the value of a dollar, and give them skills such as comparison-shopping for purchases, saving for the long-term, avoiding credit card debt, and investing in the stock market, you can set them up for great success in life. Not only will they likely be more financially secure in the future, but they may even be able to retire early and will probably be self-sufficient, not causing you worry or needing you to frequently bail them out. Great money management isn't just for grown-ups. 

Finally, don't make the mistake of thinking that you'll be fine in retirement because you'll receive Social Security checks. The average Social Security retirement benefit was recently $1,416 per month, or about $17,000 per year. The maximum benefit for those retiring at their full retirement age (66 or 67 for most of us) was recently $2,788 per month -- or about $33,500 for the whole year. For those who wait until age 70 to start collecting benefits, the maximum is $3,698, or about $44,400. These maximums go to those who earned a lot more than average in their working lives.

Fortunately, there are ways to increase your Social Security benefits. The more you know about them and the sooner you start strategizing, the better.

Let the only scary things in your life be kids' costumes at Halloween. Take steps now to prevent scary financial troubles. 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian owns shares of Amazon and Zillow Group (C shares). The Motley Fool owns shares of and recommends Amazon, Zillow Group (A shares), and Zillow Group (C shares). The Motley Fool has a disclosure policy.