We've all made mistakes with money, right? Whether you're a seasoned adult with a good job or a young person just starting out in life, financial fails are just a part of the learning process. Even the most financially savvy individuals can sometimes make mistakes and find themselves in tough situations.

However, it's important to learn from these mistakes and avoid repeating them in the future. In this article, we'll discuss some common money mishaps and offer tips on how to avoid them. By taking the right steps to manage your finances, you can achieve financial stability and peace of mind.

Slow Down and Examine Money Mishaps

We all have those cringe-worthy moments when we realize we made a mistake with money. It’s tempting to pretend these mistakes never happened, but as the famous George Santayana quote (often misattributed to Edmund Burke) goes, “Those who cannot remember the past are condemned to repeat it.” Santayana was commenting on world events, but these words are valuable to consider on personal terms as well. In financial terms, this advice tells us that we don’t need to dwell on the embarrassment, but we do need to examine these mistakes to avoid repeating them. What’s more, we can take note of the mistakes others make in order to smartly avoid them ourselves!

Here are some examples of other people’s money mishaps that we can learn from. (We’ve changed the names for privacy’s sake!):

Anna’s story

When I graduated from college, I had a lot of student loans, and my lender gave me the option to postpone them because my first job out of school didn’t pay much. So I just postponed my payments as long as I possibly could, but I had ignored the fine print that my loans would still accrue interest during those years. I technically could have afforded those payments all along if I’d scrimped in other areas, and now I owe thousands more because of all that interest.

Lee’s story

My family was always low-income in my childhood, so I grew up thinking it was a better deal to buy the cheapest clothes from the cheapest stores. Three shirts for $10 is better than one shirt for $20, right? Now I’m a little older, I can see where my parents taught me wrong. You get what you pay for, and paying a little more for good quality saves you money in the long run. Plus, those cheap shirts accumulate over time, and clutter up the closet, causing more stress.

Why Financial Literacy Matters

Anna’s and Lee’s stories demonstrate a common theme: a lack of financial literacy. It can mean the difference between thriving financially and staying mired in debt. Some people are raised in environments where financial literacy is imparted to them from a young age, and they know how to make informed decisions about money. However, if you come from a family of limited means, you often take on money habits passed down by your parents. Unfortunately, this key life skill still isn’t taught well in schools, if at all, so you don’t really start learning better habits until small behaviors grow to big mistakes in adulthood.

Here are some ways being financially literate can make life better:

1. You know where every cent of your money is and where it’s going.
   This means you are fully aware of all of your income and expenses, can create a budget and stick to it, and have plans for managing any debt you may have.
2. You have funds ready for investment — and know when to say no.
   By building up savings, not only will you be ready for emergencies, you’ll also be ready for opportunities like entrepreneurship and investment. What’s more, you’ll be able to recognize get-rich-quick schemes for the traps they are.
3. You strongly believe in quality over quantity.
   This goes for anything from kitchen gadgets and athletic socks to mutual funds and car insurance. When you’re financially literate, you don’t fall for one-click shopping on social media, and you put your dollars where they garner the greatest returns.

Tips for Avoiding Financial Fails

While there will always be something tempting us to spend our money, developing the skills and knowledge to avoid financial failure is essential.¹ Before even getting into retirement savings and strategic investments, here are some basic ways to start being a better money manager:

• Craft a budget and force yourself to stick to it. Remember to set aside money for savings and emergencies before anything else.
• Never spend your emergency fund on a non-emergency, and be honest with yourself about what constitutes an emergency. Three to six months’ worth of living expense should be the minimum you keep on hand.
• Never, ever take on debt that could be paid right away. Keep debt limited to essential big-ticket items, such as car or mortgage payments. (Ignore that 0% interest offer — it’s a trap!²)
• Track your expenses to identify where your money is really going and find ways to reduce what's unnecessary. (We’ve got a great article about this!)
• Avoid impulse purchases. Take your time to research your options in terms of cost and quality. (Hint: That cute thing from the Instagram ad? It’s junk, and bad for the environment.)

Financial Fails Are Unavoidable, But You Can Try

Remember, nobody's perfect when it comes to money. We all make mistakes, whether it's impulse buying a $100 purse when you’ve got 5 perfectly good ones already, or not reading the fine print on a predatory credit card offer.

The good news is that we can always learn from our mistakes and do better next time. So don't beat yourself up over a financial fail - dust yourself off, examine what went wrong, and take the experience as a step in your journey toward financial literacy!