Not a single school subject, from primary school all the way through university, teaches you how to earn and manage your money intelligently. Even most economists are up to their eyebrows in debt. The website MainStreet surveyed several personal finance experts for their views on the worst mistakes people make with money. They came back with a list of mistakes that runs from the age of 10 to the age of 60.
Whether you are 20 and still studying or 60 and still worried about not having a comfortable standard of living, financially speaking, you are falling victim to many of these mistakes, or paying for the mistakes of the past.
The most common money mistakes we make in our personal finances
Since the original article focuses on the American system, which is different from the Spanish or Latin American one, we are going to adapt those common mistakes to our system and split them into the decades of our lives, because the mistakes in financial education start at school.
From 10 to 20: the worst financial mistakes we make
We split this stage further, because between the ages of 10 and 16 the responsibility for our financial education lies with our parents and the education system, a system that teaches everyone the same way, regardless of whether a pupil has more talent for chemistry or for maths.
We teach our children to follow the herd
Most young people can remember how many league titles Real Madrid or Barcelona have won, who the league’s top scorers are, and a whole series of facts that show an enormous capacity for learning, but one that is perhaps being misused.
Every young person of secondary-school age should already have basic financial knowledge, and should already know the stories of great entrepreneurs and business people. Before they turn 20, our children should already have read some of the most basic books on financial education, because it is the only way to whet their appetite to take on the world.
While we cannot expect young people to know exactly what they want to do in the future, if they are clear that they want to earn a lot of money, that does not really matter. And never even think of telling your child that money is not important, because you are setting them up to fail. Many of the problems your child will face in the future will come from a lack of money.
See also: 11 ideas for saving more money on small things that add up over the year
From 20 to 30
Had I known at 20 half of what I know today, I would be rich now. And I am not talking about a few hundred thousand euros; I mean I would literally be a millionaire. At 22, I was earning more money than most adults.
I was a young executive in the world of sales, and on some weekends I spent more than adults earned in a whole month. Why? Because I could, and because the following month I would get another good paycheque with astronomical commissions.
To avoid any confusion, my case is nothing like that of Turney Duff, the man who made 10 million dollars on Wall Street and blew it on drugs, alcohol and prostitutes. I have never liked drugs or alcohol, and although I respect the profession of prostitute, I am not a customer.
I simply adjusted my standard of living to my income. I was young and earning a lot of money, and nobody told me that you have to make the most of the good times to save, because they tend to end sooner or later.
Not saving, wasting money and credit cards are among the mistakes we make in our twenties
This is a time when people like to show off as soon as they earn some money. They like to have the latest technology, buy a new car as soon as they land a job, and the craziest ones take on a lifelong mortgage at the worst possible moment.
Nobody explains to them that a mortgage should not take more than 30% of their income. In Spain, many young people have taken on mortgages of up to 80% of their income. Likewise, before you buy an iPhone, think about whether you would be better off buying shares in the company that makes it (Apple).
This is probably the best time to save. You have strength and health, so you can work hard at anything while you keep chasing your dream.
And it is undoubtedly an ideal age to take risks with stock market investments, especially if the market is at the right point.
Essential reading: 10 money and finance tips you should follow before you turn 30
In that article we explain how to avoid the worst money troubles with a few simple guidelines.
Money mistakes between 30 and 40
At this age, the mistakes revolve around marriage and the mortgage. Since the high divorce rate we see today became public knowledge, marriage has become the biggest destroyer of wealth in the world.
Statistics say that if you marry at 32, there is a high probability that you will divorce before 40.
See also: Money conversations you should have with your partner before getting married
Needless to say, in Spain, in a divorce where there are children, the man is left completely unprotected. A standard separation-of-property arrangement is not enough. Talk to a good adviser in this area so they can tell you how to protect yourself for when the love runs out.
Even so, at this age most people already want their dream home and even a second home for the summer. Married couples often make the mistake of taking on debt because both partners have seemingly stable jobs, so as soon as one of them falls through, or both do, the debts immediately start catching up with them.
The lack of an emergency fund is also common in most families. Remember that every person or family should have an emergency fund to survive for 6–12 months if they received €0 in income during that time.
(Read: 7 mistakes we make with our personal finances.)
See also: What is the best financial advice we could give anyone?
Ironically, when most people get married, instead of being better off financially (since they now have two sources of income), they tend to find ways to be worse off. A lack of planning and not talking about money with your partner usually ends up taking its toll.
Financial mistakes between 40 and 50
Continuing with the ironies of financial education, it is from the age of 40 that people start taking financial risks, which, combined with a lack of preparation and financial knowledge, often leads to bad investments.
And remember that acting crazy with money at 25 is not the same as doing it at 45, because you have much less time to recover from a bad investment.
This is also the age when people start relying on loans, and we carry on living without a detailed budget, without a financial plan. Your forties are a time to save, both for the children’s university and for our own retirement.
Of course, this is the age at which we should already be reaping the rewards of the investments we made in our twenties or thirties.
A high percentage of people between 40 and 50 are paying off some kind of debt at over 20% APR instead of earning returns of more than 8% a year.
From 50 onwards
From this age on, we reap the rewards of our past planning or pay for the excesses of our past. That is why we should try to start doing things right as early as possible and have a plan from a very young age. That said, many new entrepreneurs have started at this age. It is never too late for anything, but if you start early you put the odds in your favour.
This is where that saying applies: ten years from now you will regret not having started today.
See also: 10 money tips from the most successful people in the world
Featured image: Ken Teegardin, CC BY-SA 2.0, via Flickr.
