The 3 Worst Personal Finance Mistakes Experts Warn You're Probably Making

Managing your money isn't easy. This is especially true for savers eyeing an eventual retirement. Further, the lengthy span of retirement planning makes it particularly difficult to coherently track for many consumers. It can be tough to understand where you are in terms of your progression from year to year and decade after decade. More importantly, a wealth of common money-saving tips that make the rounds in conversation and various channels often clock in as bad advice that you should ignore. From poor money advice to bad money habits, there's lots of room for improvement in the average consumer's personal finance story.

Fortunately, many of the personal finance mistakes most people make are easily corrected. We reached out to Lawrence Sprung, CFP, author of "Financial Planning Made Personal," and founder of Mitlin Financial, to discuss some of the ways in which consumers can improve their personal finance scorecard. Sprung zeroed in on three areas for improvement, as well as a few concrete steps for how to achieve better overall personal money management in each space. He's a consummate proponent of finding the joy in life, both now and later on in retirement. Sprung's take on financial management revolves around lifestyle; namely, in outlining the kinds of things that make you happy, and then planning for how to make your finances meet those goals.

As a result of Lawrence Sprung's overarching approach to personal financial management, it's no surprise his first piece of advice centers on planning. With the creation of a long-term financial plan sitting so prominently in the personal finance expert's suggestion pool, it's perhaps a little surprising that so many people fail to plan for the future. Among some of the most unsettling financial statistics surrounding retirement planning is the reality that less than half of Americans nearing retirement (44%) think they have enough saved to afford it, per Schroders 2024 U.S. Retirement Survey.

This boils down largely to a failure to plan for what comes next. As Lawrence Sprung explained, "One of the worst money mistakes is not having a plan. Many families who come to us have started saving and investing, but their money is scattered everywhere. Their finances are disorganized, and it's hard for them to know where all their money is or what their financial goals are. We work with those families to craft a plan for enJOYing life and planning for their future."

Building a cohesive plan allows you to understand where your money is, how it's working for you, and where you stand in the progression of that plan. This is true regardless of the investment types you prioritize. A real estate investor, for instance, might have assets lying in different parts of a city, even across state lines. A plan for leveraging these and other assets is even more important when considering disparate investment tools.

A financial adviser is a great ally to have on your side. These financial professionals can offer sage wisdom about budgeting and saving for retirement, as well as information about specific investment products that will help you get there. Lawrence Sprung is careful to note that only fiduciaries are the advisers you should work with, however. They're legally obligated to work in your best interest, so there's no chance of a conflict or nefarious behavior in the background.

But Sprung also cautions savers and investors about working with too many voices. "A few of the families we work with now used to think that having more than one adviser, like diversifying your investments, was a good idea. However, this can actually cause problems," he said. "Imagine trying to sail a ship across the ocean with two captains who have different ideas about how to get to your destination."

The same kind of trouble can arise when an investor takes guidance from more than one financial adviser. "You need one adviser who understands your family's goals and objectives to guide you and keep things on track," Sprung said. It's a good idea to speak with more than one adviser when you're considering someone to work with. However, once you've talked through your finances and made sense of different professionals' strategies to chart the course ahead, you'll need to pick someone to make that journey with and leave the rest. Financial professionals might differ in risk tolerance, asset-class priority, and elsewhere, so talking through some of the specifics can help you find someone that jives best with your needs, priorities, and goals.

It's important to realize that compounded interest is the greatest asset you have on your side when planning for your retirement. According to Lawrence Sprung, "Compound interest, often called the Eighth Wonder of the World, can greatly boost your financial success. Many people think they can wait to save or invest until they have more income or fewer expenses. The reality is you should be saving as early as you can; the minute you have wages, start a savings strategy."

Sprung pounced on this issue during our conversation, saying, "Not starting early is one of the biggest money mistakes we see." While he noted all the reasons why a young person might consider putting off retirement savings, he cautioned against this financial choice in favor of all the benefits that youthful saving can provide. Said Sprung, "Starting in your teens or 20s allows compound interest to grow your assets over time, so you won't need to contribute as much later."

"We often hear that young people don't save because their income is low. While this may be true, their responsibilities are usually low too. As you get older, your income might increase, but so will your responsibilities, like a mortgage, a spouse, kids, and aging parents. Start saving early to get ahead. Your future self will thank you," he added.