The 5 Most Expensive Money Mistakes Americans Make

I was 3 the first time I remember being told I'd done something wrong. Upon seeing the artwork added to my bedroom wall, my father had zero sense of humor. I called my masterpiece "Exploration in Crayon," yet my father did not recognize its beauty.

I still don't love hearing that I've done something wrong, but here's the difference between childish me and adult me: I now understand how much there is to learn from my mistakes.

This brief list represents five of the biggest mistakes financial experts say Americans commonly make, and how you might sidestep them.

1. Believing an emergency fund is a pipe dream

We all start somewhere, and for many of us, early adulthood finds us low on funds. The very idea of building an emergency fund when we barely have enough money to cover our monthly bills seems ludicrous.

This mistake appears to be rooted in the belief that we must deposit a specific amount of money into our emergency savings accounts -- you know, like another monthly bill. The truth is, throwing spare change into a jar each evening and then depositing that change into a savings account adds up.

Let's say the change averages $7 a week. After a year, you have $364 saved for emergencies. It doesn't sound like much, but can make a real difference. Imagine that your washing machine stops working. According to Angi, the average cost to repair a washing machine is around $180.

You have emergency cash stashed in the bank, so you don't have to worry about going into debt for the bill. You can withdraw the funds and cover the cost of the repair. However, if you have to pay with a credit card, you could find yourself stuck repaying the $180 with interest.

2. Carrying credit card debt

Credit cards can be a great weapon in a financial arsenal. Faithfully paying credit card debt builds your credit score. However, the average credit card debt among cardholders carrying a balance was $6,365 in 2023, according to recent research from The Ascent.

While that amount of credit card debt may not seem significant at first glance, consider this: If the interest rate on the card is 20%, a cardholder making a minimum monthly payment of $210 will spend about 3.5 years paying it off. Worse, they'll pay $2,573 in interest.

While paying off credit card debt is not necessarily easy, it is one of the kindest things you can do for your financial situation. Whether you pay the card off by reworking your monthly budget, renting out garage space, or adopting a payoff strategy like the snowball method, getting rid of credit card debt is like giving your budget a new lease on life.

3. Putting off retirement saving

I get it, none of us can imagine ourselves ever getting old. And if we're never going to grow old, why save for retirement? Ugh. I may not be mad at my 3-year-old self who colored on my bedroom walls, but I would seriously love to kick the butt of the young-adult me who postponed saving for retirement.

Because we did not invest when we were young, my husband and I have spent years budgeting half of our monthly income for retirement. We are fortunate to be able to do that, but there are trade-offs involved. We don't drive fancy cars, we live in a relatively modest neighborhood, and still budget every dollar we spend.

Would we have lived like royalty if we'd started investing earlier? Probably not, but having a few more options might have been nice. The earlier you begin investing for retirement, the more time you give the magic of compound interest to work in your favor.

4. Impulse buying

According to research, between 40% and 80% of all purchases are impulse buys. It's so common that we don't always notice when we're doing it. Whether we buy because we're sad, nervous, hungry, or bored, emotional spending can wreak havoc on a budget. Imagine how different your checking account would look if you cut all impulse purchases.

You may not be able to cut impulse buying overnight, but there are steps you can take to improve the situation slowly. For example:

• If you don't have one, create a monthly budget. There's nothing like seeing your financial obligations in black and white to remind you where you stand.
• Consider using a budgeting app. It doesn't make math errors, and the time spent entering financial information can help you keep your eye on the ball.
• Imagine the future. This isn't just about planning for retirement. It's also about considering all the other things you want to do with your life (and money). For example, setting a goal like helping the kids pay for their education, going on a long European vacation, or paying the house off by the time you're 55 gives you something solid to work toward.

5. Not writing a will

It's a rare soul who enjoys thinking about death, but that's not what writing a will is about. Drawing up a will is about ensuring your wishes are carried out after you die and your loved ones will be looked after.

In the middle of the pandemic, it came to light that 68% of Americans don't have a written will. Even if a person thinks there's no reason for a will because they don't have much money, it's still helpful for those left behind to have a clear picture of how they want their possessions distributed.

Hiring an attorney to draw up a basic, no-frills will should cost around $300. It's a small price to pay to leave a thoughtful gesture behind.

We're all going to make plenty of mistakes in life, and that's okay. The goal is to learn as much as we can from our missteps along the way.