In Money mistakes you don’t want to make, I shared some tips on day-to-day money management, spending and debt. Today’s post examines some more money mistakes, with a focus on saving, investing and planning. If you’re ready to develop some good money habits, let’s dive in.

This post was originally published in November 2020 and updated in September 2023.

Disclaimer: I’m not a financial advisor. Everyone’s situation is different. If you need help with your money, find a qualified financial advisor.

Saving

Pay yourself first. You know it’s important but with high debt levels and the pressures of everyday life, saving often gets pushed lower down the priority list.

Here are some saving slipups you might be making and how to get on track.

Delaying saving

Saving is a great habit to get into and it’s never too early to start. Even if you’re just working a part-time job as a teenager, start saving now. Once you get used to saving every time you get paid, you won’t miss the money.

Thanks to the magic of compounding, even small amounts add up over time.

So, start paying yourself first. If you think you don’t have money to save, look at your budget to find opportunities. Start small and increase your savings over time. You’ll be glad you did.

Not joining your workplace savings plan

I wrote about this in Retirement savings advice to my younger self. In Canada, less than half of workers have access to an employer-sponsored retirement plan. Of those who do have access to a plan, many don’t join.

If you’re one of the lucky minority, don’t delay. Join the plan as soon as you’re eligible. It’s the easiest way to automate your savings.  

Missing out on employer matching contributions

If you’re already participating in your company retirement plan, check to see if your employer offers a matching contribution.

If they do offer a match, look at your budget and try to find a way to put enough money into the plan to get the maximum employer contribution. It’s free money!

Not having an emergency fund

If the pandemic taught us anything, it’s that life can change quickly. If you don’t have an emergency fund, you could end up going into debt or dipping into long term savings when life’s challenges come along. In addition to the stress of the issue at hand, you’ll be scrambling to find the money to deal with it.

Experts suggest having an emergency fund of three to six months of expenses. If you don’t have one, start building one today.

Investing

Once you start to build savings, you need to figure out how to invest it. Investing can seem complicated and intimidating but the wrong decisions can have serious consequences.

Sticking to “safe” investments

Interest rates have been rising recently but, before 2023, interest-bearing investments that were once thought to be safe typically offered a guaranteed return in the 1% range. Considering the long-term inflation rate in Canada and the United States is around 2%, you won’t earn enough interest from guaranteed investments to keep pace. This means your savings will lose purchasing power over time.   

Interest-bearing investments are a good option for short-term savings. For longer-term goals like retirement, most people can tolerate more risk. Get to know your risk tolerance and talk to a professional licensed advisor who can help you find investments that will work for you.

Panic selling in volatile markets

You’ve probably heard the phrase “buy low, sell high”. Sounds logical right? It might surprise you to learn that a lot of people do the opposite.

When financial markets tumble, it’s easy to let your emotions get the better of you. You might be tempted to sell your investments when markets are low. This behaviour is detrimental to your savings and can prevent you from reaching your financial goals.

If you look at the history of financial markets, there is always an upward trend over longer periods of time. If your goals haven’t changed, the best thing you can do when markets drop is keep calm and stay the course.

Market dips can also be a good opportunity to buy at a low price, but even professional investors don’t try to time the markets. The best strategy is to save a consistent amount on a regular basis.

Planning and goal setting

Finally, everything is better when you have a plan. You might think financial planning is for people with a lot of money. Everyone, including you, can benefit from having a financial plan.

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Avoiding talking to your family about money

Money remains one of the last big taboos of polite conversation. But talking about money can avoid arguments and misunderstandings. It can also help get you and your loved ones on the same page and working toward the same goals.  

Make time to have a money talk with your partner, your kids and even your aging parents. It will help you align toward common goals and avoid nasty surprises.

Not having a plan for your future

Goals are important in all areas of life, especially your money. Study after study indicates people with a written financial plan have higher savings, less debt, and more confidence in their day-to-day finances.

Take time to think about what matters to you and set some financial goals. Write your goals down, figure out how you’ll achieve them, and track your progress toward them. Then, revisit them regularly to make sure they still make sense.

This is where getting advice can really help you, which brings me to my final point.

Going it alone

The Value of Financial Planning survey confirms people who engage a financial planning professional have higher financial and emotional wellbeing.

There are so many things to think about when it comes to money. You don’t need to do this alone. A professional financial advisor can help you create a plan to achieve your goals.

Find out if your employer offers financial advice services through your workplace retirement plan. If they don’t and you live in Canada, check out FP Canada’s Financial Planning for Canadians site. It can help you find an advisor in your area.

It’s never too late

Don’t forget, it’s never too late to turn things around and start building a better future. You can do it!

I hope you’ve found these tips helpful. Are there any things related to saving, investing and planning that you’d add to this list? Tell us about them below.