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Avoiding the Most Common Financial Mistakes

By: Steve Johnson

8/12/2008 - 16 Comments

Today, I’m going to look at the three most common financial mistakes.

Ron Blue wrote a book called, ‘Master Your Money’ in 1986 about personal finance. Then, in 2004 Ron revised his book and published an updated version, The New Master Your Money: A step-by-step plan for gaining and enjoying financial freedom.

Ron has been a Christian financial counselor and teacher for over 30 years. Last month I had the privilege of reading his book. Ron has some interesting concepts and defines financial planning as:

“Ultimately, financial planning is the predetermined use of financial resources in order to accomplish certain goals and objectives.”

Based on this definition, financial planning starts with having a goals or an objective. The first step is to have a reason or a purpose for financial planning. Maybe it’s going to college or buying a house or putting food on the table, whatever it is, the first step in financial planning is finding a reason for why you want to plan how you are going to spend your money.  Choosing a good reason is perhaps the most important step, because your reason needs to be a strong enough motivator to get you through the challenges that lay ahead - the challenges of resisting the constant advertising that we are bombarded with each day.

The most interesting part of Ron’s book is his chapter on ‘Avoiding the Most Common Financial Mistakes’.  The idea is if you have avoid these three mistakes, you're going to find yourself in a good financial position.

Common Mistake #1: A Consumptive Lifestyle

“I have been asked many times what the biggest financial mistake I see is, and the answer is easy – a consumptive lifestyle.  A consumptive lifestyle is simply spending more than you can afford, or spending more than you should, given your other goals and priorities.“

Ron suggests one of the best ways to avoid this common mistake is to avoid the marketing advertisements that get you to spend your money.  Less time watching TV and less time at the mall will reduce your exposure to these ads, which will keep you from spending money of things that you don't want to.

Common Mistake #2: No Budget

“If you have no budget, which is in effect a short-term plan, in reality you are planning to live as a responder.”

Ron suggests that a budget guides you just as a road map does when driving in an unfamiliar area. Not having a map creates fear, perhaps frustration, and certainly anxiety. A budget keeps you from spending money on things that you really don’t want.

Common Mistake #3: Driving to the Poor House

“The third most common mistake in the lifestyle area occurs in buying and selling automobiles. ... The cheapest car anyone can ever own is always the car they presently own, unless it is sold and the proceeds reinvested in a lower priced car; and the longer a car is driven, the cheaper it becomes to operate.”

Ron has a detailed chart calculating all the expenses of a new car versus keeping an old car and the numbers don’t lie. By far, the cheapest car to drive is the one that you already own.  


The rest of the book shows many examples of how to create a budget and slowly increase your positive cash-flow by paying off loans and reducing your spending. The increased cash-flow can then be put to work earning money for you in a saving account or other type of investment.  Financial planning is a slow process and it takes many years to complete long-term financial goals.

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The New Master Your Money

This book provides a step-by-step plan to financial freedom presented in an easy-to-understand format. Do you know if you have enough? Do you know how much is enough? If you can't answer these questions, The New Master Your Money is for you. Ron Blue extracts principles from God's Word and applies them to your financial portfolio. Ron's professional experience in financial planning will be an asset to you and to your family for generations to come.

Living Rich by Spending Smart

Mr. Karp provides quick, easy to read, practical tips for smart spending choices. This isn't a book about saving for investing; it’s about making purchase decisions wisely and with purpose. What's more important than taking control of spending habits? Practical advice, easy to adopt changes for sound money management. Easy read with great tips, this book pays for itself in ONE day!

How to Save Money Every Day

Ellie Kay has done it again! In her new book "How to Save Money Every Day," Ellie will have you laughing (literally!) all the way to the bank with the money you'll save following her tips. What makes Ellie's advice so extraordinary is that in many ways it's so...well...ordinary! This is practical stuff anyone can put into practice every day in every area of life.

The Budget Kit

This is a great book if you want to get your financial life in order! It offers practical information, easy-to-follow instructions, and more than 25 worksheets that you use to organize, plan, track, schedule, and manage your financial life. Every area is covered. The book contains worksheets for tracking variable income, recording non-monthly expenses, recording debt repayment, tracking debt payoff, tracking savings, planning gifts, planning holiday expenses, recording online and mail order purchases, recording wants and needs, recording financial goals, a Monthly Budget Worksheet, and more.