12 Costly Financial Mistakes to Avoid

As one year comes to a close and a new one begins, it’s a natural time to reflect on what worked, what didn’t, and how you want to move forward—especially when it comes to your finances. Small habits, both good and bad, tend to repeat year after year. Recognizing common financial missteps now can help you start the new year with clearer goals and stronger money habits.

Here are 12 costly financial mistakes to review – and avoid – as you plan for the year ahead.

1. Emotional Spending
   Stress, boredom, and fatigue can all lead to impulse purchases. Over time, emotional spending can derail your budget and savings goals. In the new year, look for healthier ways to manage stress, such as exercise, creative outlets, or talking with a professional.
2. Skipping a Budget
   If you’re not tracking where your money goes, it’s easy to lose control. Reviewing last year’s income and expenses can help you build a realistic budget for the year ahead. Revisit it regularly and adjust as your life changes.
3. Buying More Car Than You Can Afford
   A car payment is only part of the cost. Insurance, fuel, maintenance, and repairs add up quickly. As you plan future purchases, consider reliable used vehicles and financing through CommonWealth to keep costs manageable.
4. Not Building an Emergency Fund
   Unexpected expenses don’t follow a calendar. Even small, consistent contributions can help you build a safety net. Aim to start (or strengthen) an emergency fund that covers three to six months of essential expenses. CommonWealth offers an Emergency Savings Account designed to make it easy to save more. The more you add, the higher your APY, up to 3.00% APY¹.
5. Putting Off Investing
   If investing was something you meant to “get to someday,” make this the year you start. Time and compound interest are powerful tools, and even modest investments can grow significantly when started early.
6. Cosigning on Debt
   Reflect carefully before cosigning a loan or credit card for someone else. You’re responsible for the debt if they can’t pay, and missed payments can impact your credit well into the future.
7. Letting Debt Go to Collections
   Unresolved debt can follow you for years. If you struggled to keep up with payments last year, reach out early to creditors to explore payment options before accounts go to collections.
8. Using Home Equity for Non-Essential Spending
   Home equity can be helpful for necessary expenses like repairs, but borrowing for luxury purchases adds risk. As you plan financially for the year ahead, use home equity cautiously and only when it truly makes sense.
9. Neglecting Your Health
   Medical expenses can take a major toll on your finances. Prioritizing physical and mental health now through preventive care, stress management, and healthy habits can help reduce long-term costs.
10. Not Having a Will
    A new year is a good reminder to get your affairs in order. A will ensures your assets are distributed according to your wishes and allows you to name guardians for your children, rather than leaving those decisions to the state.
11. Overspending on Your Children
    Looking back on the year, it’s easy to see how small extras add up. Setting spending limits and focusing on savings, both for retirement and your children’s future, can create greater financial stability.
12. Failing to Diversify Investments
    If your investments are concentrated in one area, the new year is a good time to review your portfolio. Diversification helps manage risk and can provide more consistent returns through changing market conditions.

Start the Year with a Stronger Financial Plan
No year is perfect when it comes to money decisions. The key is learning from the past and making thoughtful changes going forward.

If you need guidance, CommonWealth is here to help. We offer free Certified Financial Counselors who can help you create a personalized plan that supports your goals in the year ahead.

1APY=Annual Percentage Yield. The Emergency Savings account is a tiered high-yield account. Rates are variable and subject to change at any time. Minimum deposit required to open Emergency Savings is $25. Limit one Emergency Savings account per member. Offer is subject to cancellation without notice and cannot be combined with any other offer. The maximum deposit is $250,000. Fees may reduce earnings. To qualify for the Emergency Savings APY, you must meet the following requirements by the end of each month: an automatic transfer, direct deposit, or ACH deposit transactions totaling $25 or more per month. Membership in CommonWealth is required.  All new accounts will be verified by Chex Systems. Offer is subject to cancellation without notice and cannot be combined with any other offer.