5 Stupid Things to Do With Your Money

Odds are you've made at least one of these mistakes.

Who among us has not made a truly terrible decision regarding money, only to beat ourselves up for it later? Like diet, exercise, and sending Mom a card on Mother's Day, being financially responsible takes discipline, and a lack of discipline can lead to some truly ridiculous decisions.

Here are five of the worst.

1. Being emotional

Dr. Brad Klontz is a financial psychologist (yes, that's a thing) who claims that the emotional part of our brains is larger than the logical part -- and it's the emotionally driven financial decisions that put us in a pickle. 

Imagine you're shopping for a good, reliable car. The left, more logical part of your brain recognizes that your budget is tight and you need something sensible. While walking the lot, though, you see the car of your dreams: an expensive luxury model you've fantasized about owning.

Suddenly, the emotional side of your brain takes over, reminding you that life is short, you work hard, and you deserve a nice ride. 

No matter how bright you are, how accomplished in the rest of your life, it's easy to go completely stupid when it comes to money matters.

Because there's no way to separate emotions from financial decisions, it's vital to have a plan in place when the two collide.

• Acknowledge what you're feeling.
• Accept that you're being emotional.
• Give yourself a cooling-off period. If you're making a large purchase like an automobile, give yourself 24 hours to weigh your options. If you're considering something small, like a teapot or a drill, go have lunch or a cup of coffee and think about it.
• Rather than worry about how sad you'll be if you don't make a purchase, imagine how good you're going to feel about being financially responsible.

2. Living beyond your means

In an article about infamous overspender Paul Manafort, The Washington Post describes how to recognize that you're living beyond your means:

• You have enough income to pay for basics, but ...
• You indulge in eating out, vacations, and overspending on cars, clothing, and other unnecessary items.
• The money spent on non-necessities is redirected from future expenses, like sending your children to college or saving for retirement.

Other signs you're in trouble include:

• You find yourself worrying about money.
• You argue with your partner about finances.
• You're unable to meet your financial obligations in spite of making enough money.
• You discover that you have duplicates of the same item.
• Some of your possessions still have the price tag on them.

If you make enough to pay for your basic expenses but divert money from savings and investments to have fun, you're living beyond your means. If you can't sleep at night, argue with you partner, or not paying your bills, you are living beyond your means. 

3. Lending money

Emotions run high when someone we love is in trouble (and emotions and finances don't mix, as we've discussed). If that trouble is financial, it's easy to reach into our reserves to help them out of their predicament. There are many reasons why lending money is a bad idea, including:

• It's rarely a loan. There's a good chance that you'll never be repaid.
• You may need the money yourself. Even if you're financially comfortable today, a job loss, illness, or other emergency can change your situation dramatically.
• You're taking on unnecessary risk. If a person comes to you for a loan, it's likely because a lender considers them high-risk. Once you've made the loan, that risk is yours.

4. Not knowing the difference between cheap and frugal

The words cheap and frugal are not interchangeable. One means being so tight with money that you don't care about quality, and the other means being careful with the money you have. Let's illustrate the difference.

Cheap: You need a sofa for your new apartment. The price of new furniture strikes you as ridiculous, so you buy a used sofa on Craigslist. Within a year, the frame has broken, and you're forced to buy yet another sofa.

Frugal: You shop at a reputable furniture store, ask to see what's on sale, find a sofa you want, and enjoy it for years. 

There's a saying in Spanish, lo barato sale caro, or "the cheap comes out expensive." The difference between cheap and frugal boils down to whether cutting corners ends up costing you more in the long run.

5. Planning to invest "tomorrow"

Approximately 29% of Americans aged 55 and older have nothing saved for retirement. That means no 401(k), no IRA, and no pension. 

Of all the reasons to retire with nothing but Social Security to live on, procrastination may be the worst because it's preventable. If you have a chance to invest but have decided to wait (for whatever reason), you're already costing yourself money -- and probably far, far more money than you realize.

Say you're 28, have a loan, and don't believe you can invest until those loans are paid off. Could you find a way to mine $100 a month from your budget? Could you pay a bit less on dining out, drop a couple of subscriptions, and/or pick up a part-time gig that brings in an extra $100? However you come up with it, let's look at what $100 a month can do for you.

If you invest that $100 in a 401(k) or IRA earning 8% annually, you'll have $309,700 in pretax money saved by age 67.

If you wait to invest that $100 per month until your loan is paid off in 10 years, the pretax amount you'll have saved by age 67 drops to $134, 752. Compound interest is just that powerful. 

We all waste money sometimes or make bad financial decisions. What's important is to understand why you're making them and learn from your mistakes. Remember this: You're in control of your financial decisions. You can rush headlong into foolish mistakes, or deliberately decide to spend money in a way that will benefit you far into the future.