Spending

How to avoid money mistakes, from the author of 'The Dumb Things Smart People Do With Their Money'

Courtesy Jill Schlesinger

Even smart people can do dumb things when it comes to money. Money can be complicated, and it's a topic many people are uncomfortable discussing with their friends or family. As a result, it's easy to make a financial misstep that can have a domino effect. Like not saving enough, early enough, for retirement.

We all make mistakes, though, and many are easy to avoid or to bounce back from.

That's the message certified financial planner and CBS business analyst Jill Schlesinger is trying to convey in her new book. In "The Dumb Things Smart People Do With Their Money," she outlines 13 common and costly financial mistakes people make, like investing in complicated financial products they may not understand, including precious metals or reverse mortgages.

Why it's so easy to make money mistakes

Over the years, Schlesinger says, she couldn't understand "why is it that I'm hearing from these incredibly smart people who consistently do dumb things with their money?"

The primary reason we make bad decisions with our money, Schlesinger says, is because we're human. We make decisions based on a number of factors, like emotions, gut feelings, and superstition.

"We're not programmed to make good financial decisions," Schlesinger says. "We are emotional beings. We're not algorithms. Even when we have the best information, our instincts and emotions lead us astray."

We are emotional beings. We're not algorithms. Even when we have the best information, our instincts and emotions lead us astray.
Jill Schlesinger
CFP

Very few people are able to examine their every financial move with deep analytical insight and steely resolve. Instead, some people blow their budgets ordering takeout, because they're hungry and feeling lazy. Or they see the market dropping and follow through on the urge to sell, despite the fact that experts say panicked selling is a move that can cost you a lot of money.

They might fall into mental traps, or get led into overspending by social media.

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Luckily, there are ways to make smarter decisions more of the time.

3 ways to make smarter money choices

These three tips may help you make better choices when it comes to your finances.

1. Take emotions out of your decisions. Embrace "stillness," as author Ryan Holiday told Grow last year, which means doing more to emotionally detach yourself from financial decisions. Stillness could allow you to "not be jerked around by your emotions," and put you back in control, helping you make smarter money moves.

2. Create a plan and stick to it. One reason that many people lose control of their spending is that they don't have a plan in place. For that reason, it's always good to create and stick to a budget. Having a sense of your income and expenses can be a valuable tool in guiding your financial decisions. This can help you avoid the urge to make an impulse buy while shopping, for example.

3. Keep the future in mind. When you make smart decisions, those will eventually cement into habits — and smart financial habits are what will help you build wealth and be prepared for the future. So keep the future in mind, and save and invest for the long term.

You may make mistakes along the way, Schlesinger says. That's natural. The important thing to do is to keep trying, and to keep in mind is that your healthy financial habits will pay off.

Understanding that we all make money mistakes can help you reframe how you feel about yours, and it can help you go on to make better decisions down the line. After all, Schlesinger says, "you're not bad with money," and a little more understanding of your own instincts and patterns can go a long way.

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