When we know better, we do better. Perhaps we aren’t really thinking about something or don’t consider it or don’t look at the long-term effects of it. That’s exactly why I wanted to narrow down and speak specifically about four particular items that can be money traps to avoid for people when it comes to their finances.
If you fall into any of these traps, there’s no shame whatsoever. We are not here to judge but rather to learn from any mistakes we may have made and do better in the future. These financial pitfalls can sneak up on anyone, and recognizing them is the first step toward building a more secure financial foundation.
1: Falling Into FOMO (Fear of Missing Out)
Fear of missing out is often defined as feeling worried about missing out on an exciting event that other people are going to or things that people have, especially caused by things that you see on social media. This psychological trigger has become increasingly powerful in our digital age.
Think about when you see a commercial or an advertisement on social media, television, radio, or while watching a video. Immediately, somehow you’re convinced that you need that thing. You might see a day-in-the-life video where someone is showing you their newest purchase or something that they are doing, and suddenly you feel that you need that thing or you need to do what they’re doing.
We have this feeling of wanting to keep up with our neighbors. Our neighbors used to just be the people who lived in our neighborhood who were actually next door to us, but now we see everyone’s lives. Not just our immediate neighbors, but people from around the world through social media platforms.
The lives we see on social media include influencers who earn money from showing you things that they have or things that they do. It’s an overwhelming amount of content designed to make you feel like you’re missing out if you don’t have what they have.
How to Combat FOMO
The best thing that you can do when this happens is to recognize it. Recognize why you’re wanting that thing now. Stop and think: “Wait a minute, I just saw that advertisement” or “I’m watching something and they’re selling something.”
I’m not saying that everything you see online that makes you want to buy it isn’t worth buying, but take a good hard look at it. It’s best to take a break and take a breath when you know this is what is happening. You can intercept that feeling of fear of missing out and ask yourself: “Am I really missing out, or am I just falling into a marketing trap?”
2: Thinking That Payments Are Always a Good Idea
This trap comes in two different scenarios, and both can be financially damaging in their own way.
Scenario One: You Have the Cash But Choose Payments
Let’s say you have the cash to pay for something. Paying for it isn’t wiping out your emergency fund, it isn’t putting you in any dire financial situation, and you have the money. But instead, you just go ahead and say, “You know what, I would rather make the payments on it. It’s not that high of interest, it’s fine.”
In that case, what you are actually doing is saying to the salesperson, “Yes, please charge me more than what is on that sticker.” You’re voluntarily paying extra money for the convenience of spreading out payments when you could have avoided that cost entirely.
Scenario Two: You Can’t Pay Cash and Must Make Payments
Now we’re going with the idea that you can’t pay for something in cash, and to get it, the only way to do it is to make these payments. When I talk about this, let’s remember that people are making payments these days on super small purchases. A huge amount of people are doing this now.
This doesn’t always have to be something like a car or a mortgage. You can make payments on a sixty-dollar item on the internet these days through buy-now-pay-later services. These things start to add up, and you are also increasing stress because you are depending on a future paycheck.
What if you lose your job or you can’t work? This can happen – it happens to people. What if you need to or want to go to a lower-paying job because you found something that would be great but they pay slightly less because you just can’t deal with your work environment any longer? Well, now you’re stuck because you have all these payments.
I remember being in this situation in my early twenties. You might say, “Well, I had to get the thing on payment because I had no money to buy it outright and my other one completely died” – whether it’s an appliance, vehicle, or who knows what. Well, in that case, work as fast as you can to get that paid off.
But think about this: a lot of these situations aren’t cases where people actually need to take out debt. I know I did it, and none of the stuff that I took out debt on did I actually need. It wasn’t something I had to put on payments. A lot of times, it’s just wants.
Important Considerations About Payments
Here are some things to think about when you’re considering payments:
- If it’s something that you just want and you want it now, remember that always having a new item isn’t something that leads to ultimate happiness. Newness wears off real quick.
- If you can save up for the purchase, you will have more pride and appreciation in the thing you’ve bought. You usually take better care of it because you’ve spent months sacrificing to save bit by bit for it.
- Small payments do add up. A small payment here, a payment there, a payment everywhere – these add up to large sums of money. This is what happened to me again. It was small things that I did that started to add up. Each payment on its own was fine and manageable, but when added together, it was a disaster.
- When you add all that stuff up, these things start to put you in a cycle where you can never get ahead, where the gap between your income and your expenses never gets larger. That gap is what you want to focus on widening, where you have more space between what your expenses are and your income. That money is the money you have to do whatever you want to do with – put a down payment on a mortgage, go on a nice vacation, or save for an emergency fund.
Breaking the Payment Cycle
The trick here is if you do have debt payments, if you’ve already taken them on, start paying down that debt and not spending the money you were spending elsewhere. Let’s say you have a car loan and the payment is four hundred dollars. You put more money towards the principal every month and get it paid off early.
Rather than taking that four hundred dollars and buying another new car or spending it on something else, take it and use it to pay off your other debts or put it towards those financial goals. That’s then going to be an extra four hundred dollars a month that’s going to be in the gap between your income and expenses – money that you’ve got that you can do things with.
3: Thinking More Money Will Make It All Better
“I just need to make more money. I need to go and get more money. I need to get a higher-paying job. I need more per hour. I need, I need, I need – that’s what will help. After that, I will be all fixed.”
If you think that money alone – that extra money – will solve your issues, it won’t. Dave Ramsey says personal finance is twenty percent head knowledge and eighty percent behavior. Your behavior has to follow that money that’s coming in.
Sure, absolutely more money can help. I am not going to discount that whatsoever. But if your behavior of spending all you have, of mindless spending, of not tracking your spending, of not knowing where your money is going continues, then it isn’t going to help much at all.
Think about the statistics of lottery winners, where over seventy percent of them go broke and lose all that money within the first five years or less. The thing is, you have to also change your behaviors when it comes to spending in order to make more money work for you.
Who knows? Changing your behaviors might actually make the current money you’re bringing in work for you without needing to earn more at all.
4: Not Having an Emergency Fund
From a broken appliance such as a refrigerator to car repairs to a busted water heater or to a sick pet, emergencies happen. Sometimes they happen all at once, which makes the situation even more stressful and expensive.
There was a statistic I found showing that approximately sixty percent of Americans can’t cover a thousand-dollar emergency expense. With inflation, any one of those examples I just mentioned earlier could easily be over a thousand dollars.
The Credit Card Trap
So what happens when you don’t have an emergency fund? We put those expenses on a credit card. Then the fact is the credit card charges an insane amount of interest – twenty-five to thirty percent in some cases. You end up paying so much more than you would have, and you can’t get ahead enough to save up for an emergency fund because the interest just keeps accruing.
Different Types of People and Emergency Funds
Then you have some people who can save for an emergency fund, but they choose just not to. They choose to spend the money elsewhere. They spend money for their current self at the expense of their future self.
Then you have some people who say, “I don’t feel that I can save because I can’t save the ideal amount.” They heard somewhere that you should put a certain percentage of your money into a savings account. “Well, I can’t do that – save ten percent,” let’s say that’s what they heard, “of my income. I can barely cover my bills.”
Just Start Saving Something
I am here to say just start, please. If it’s just fifty dollars a month, that would be six hundred dollars at the end of the year. That’s six hundred dollars more than you had when you first started.
If you start paying down your debt and you have extra money coming in from those completed payments, or you do get a raise or a bonus or a better-paying job, you can put the difference in your emergency fund.
Sometimes just starting is the best thing that you can do. Open that savings account, put fifty dollars in there, put ten dollars per paycheck. You will start to see it grow and get to where you want it to be.
How Much Should You Save?
You might ask how much you should put in an emergency fund. Again, you can get different amounts based on who you talk to. I’ve heard three months, six months, one year of expenses. I would say it’s completely up to you, but personally, I wouldn’t stop saving in that emergency fund until I had at least three months of expenses covered.
But the more you have in there, the more comfort you have if something happens. The peace of mind that comes with having a fully funded emergency fund is invaluable and will help you avoid falling into the other money traps we’ve discussed.
Conclusion
These four money traps – FOMO spending, payment addiction, thinking more income alone will solve everything, and lacking an emergency fund – work together to keep people stuck in cycles of financial stress. By recognizing these patterns and taking deliberate action to address them, you can break free and build the financial stability you deserve.
Remember, personal finance is much more about behavior than it is about math. Start where you are, use what you have, and do what you can. Small steps in the right direction will compound over time into significant financial improvements.