4 Money Management Mistakes to Avoid in 2025

Money management is one of the most important financial skills. When you know how to manage your money well, you’re better equipped to pay all your bills, build up your savings, and stay out of costly debt. Best of all, you’ll feel more comfortable about your financial situation and more prepared for the unexpected.

You can make a lot of progress with your finances just by avoiding the typical mistakes a lot of people make. There are a few in particular that are extremely common and can have a huge impact. Here are the top money management mistakes to avoid in 2025.

1. Making Minimum Payments on Your Credit Cards

Technically, you only need to pay the minimum amount on your credit card every month. But with credit cards, the minimum payment isn’t much. If you owe more than $1,000, the minimum payment is usually about 2% of the balance, according to Bruce McClary, vice president of communications for the National Foundation for Credit Counseling.

Most credit cards also have high interest rates. The average annual rate for credit cards is over 21%, according to the Federal Reserve. High rates and low minimum payments are a dangerous combination. People stay in debt longer and pay much more in interest overall. For a quick example, if your credit card has a 21% interest rate, then every $1,000 in debt costs you $210 per year!

What to do: Make credit card debt your top priority

If you can, pay your credit cards in full every month. If you’re currently in credit card debt, pay as much as you can every month until you get it paid off. The more you pay, the faster you get rid of debt and the less interest you pay.

You may be able to negotiate with your creditors yourself or with the help of a professional debt settlement company. If you have a lot of debt and can’t make your minimum payments, look into credit card debt relief.

2. Living Without a Budget

About one-third of Americans actively prepare a household budget. If you’re not in that group yet, you can join. Budgeting is a habit anyone can learn. People are sometimes afraid to budget because they believe budgeting will restrict them from living the life they want.

In practice, though, a budget can be freeing. It’s an essential tool for money management. If you create and stick to a budget, you’ll have a solid plan in place for how to spend your money. You won’t need to wonder whether you have enough for next month’s bills or your short- and long-term goals. A budget puts you in full control of your money and how you use it.

What to do: Find a budgeting method that works for you

Everyone’s a little different when it comes to budgets. Some want a detailed spreadsheet to track every single expense. Some prefer to keep it simple and set spending limits for major categories like housing and food. By the same token, there are people who love budgeting apps, and others who stick to pen and paper.

The best budgeting method is the one you feel most comfortable using. If you’re not sure which method works for you, check out a budgeting guide to learn about the most popular options.

3. Keeping Up With the Joneses

It’s easy to look at what your friend or neighbor has and believe you need it as well. This is particularly true if your social media platforms are flooded with pictures of luxury cars, designer handbags, and over-the-top house renovations.

While it may seem like having all of this “stuff” can bring joy and happiness to your life, it could backfire. Having enough money tends to make people feel content. If you try to keep up with the Joneses, Kardashians, or even Joe from across the street, it’s easier to steer into debt, increasing your mental and financial stress.

What to do: Focus on your own financial goals

If you live at or below your means and forget about what others think, you’ll find it easier to stay out of debt, save money, and feel more financially secure. It can also improve your mental health. Here are a few specific ways you can get rid of the desire to keep up with the Joneses.

• Be mindful on social media: If posts on social media are making you feel bad about what you don’t have, hide them, or stop following people who post them. There’s no reason to keep viewing content that pressures you financially.

• Plan for purchases that bring you joy: Think about what makes you happy and budget for it. Maybe it’s a hobby, or a date night with your significant other. Perhaps it’s travel, or just getting your hair done. You’ll get more satisfaction from your hard-earned money if you spend it on things that you know make you happy.

• Consider your long-term goals: The people who seem to have it all may not be considering how their current financial decisions could affect their future. Don’t be like them. Be like you. Jot down the long-term financial goals that mean the most to you, and put them in a place you’ll notice every day. The next time you’re tempted to keep up with the Joneses, glance at your goals and think about how important they are to you.

4. Forgoing Your Emergency Fund

In a perfect world, you’d never have to deal with a financial emergency. You’d always have a job, a car that works, and good health. The reality is that everyone has unexpected expenses sometimes. Since financial emergencies are pretty much a given, an emergency fund isn’t an option. It’s a necessity. When you have one, you can pay for emergency expenses without going into debt. 

A solid rule of thumb is to have an emergency fund with three to six months’ worth of living expenses. If your bills cost you $3,000 per month, then your goal would be $9,000 to $18,000. With this much in your emergency fund, a financial setback goes from a huge obstacle to a small bump in the road.

What to do: Set up your emergency savings and contribute to it monthly

Open a savings account specifically for your emergency fund. If you already have a savings account you like, see if there’s a “savings buckets” feature that allows you to set up sub-accounts for different financial goals.

Choose an amount you can afford and transfer it to your emergency savings every month. You can save any amount you like—it doesn’t need to be a lot. The key is to make saving a habit.

If you’d like to put away more money, here are a few creative ways to pump up your emergency fund:

• Sell what you don’t need: If you have electronics, clothing, household appliances, and other items that you no longer need, sell them on an online site like Facebook Marketplace, Nextdoor, or Craigslist. Then stash the proceeds in your emergency fund.

• Pick up a side gig: A side gig like delivering food or tutoring online can help you save up an emergency fund quickly. If you don’t have a lot of extra cash left from your full-time job, see what else you could do on the side.

• Plan meals: Food is one of the largest expenses for the typical U.S. household. If you want to spend less in this area, try meal-planning. When you plan your meals in advance, you may spend less at the grocery store and not go out to eat as much, which leaves you with more money for your emergency fund.

Take Control of Your Money in 2025

If you aren’t making any of those money management mistakes, great work! Keep following your budget and stay focused on your financial goals.

Don’t feel bad if you’ve made any of the mistakes on this list. You’re far from the only one, and all of these mistakes are completely fixable. Now that you know what to do and what not to do, you can improve your money management and get on the fast track to a brighter financial future.