A significant number of Americans are aiming to improve their financial habits this year. In fact, 65% say they want to make better money choices in 2025, and 26% want to increase their financial literacy. But even with good intentions, many people still struggle to understand the basics.
- 59% didn’t know what APR (Annual Percentage Rate) means
- 78% were unsure about APY (Annual Percentage Yield)
- 79% didn’t recognize ROI as “Return on Investment”
These knowledge gaps often lead to avoidable financial missteps. Let’s break down the most avoidable financial missteps—and the better habits that can take their place.
1. Skipping an Emergency Fund
Life is unpredictable. A surprise car repair or medical bill can throw off your entire budget—and without savings, it’s easy to rely on high-interest debt.
How to Avoid It:
Start small and automate your savings. Aim for three to six months of living expenses.
2. Paying Off the Wrong Debt First
It’s tempting to pay off smaller balances first for a quick win, but prioritizing low-interest loans over high-interest debt (like credit cards) can cost you more in the long run.
How to Avoid It:
Try the avalanche method—focus on high-interest debt first while making minimum payments on the rest. The average credit card APR is now over 20%.
3. Not Monitoring Your Credit
Your credit impacts everything from loan approvals to job applications. But nearly 1 in 5 credit reports contain errors that could negatively affect your score.
How to Avoid It:
Check your report for free each year at AnnualCreditReport.com, and consider a free monitoring service to catch issues early.
4. Putting Off Retirement Contributions
It’s easy to delay saving for retirement—especially when you have other short-term priorities. But that delay can seriously affect your future.
How to Avoid It:
If your employer offers a 401(k) match, take full advantage of it—it’s free money. Otherwise, open an IRA and contribute regularly. More than half of Americans (54%) say they’re behind on retirement planning.
5. Overspending and Lifestyle Creep
Spending more as you earn more—or trying to keep up with others—can lead to living beyond your means. Roughly 60% of Americans are currently living paycheck to paycheck.
How to Avoid It:
Set a realistic budget based on your goals, and regularly track your expenses. Small changes can lead to big savings over time.
6. Forgetting to Review Insurance Coverage
Without proper insurance, one major event could wipe out your savings. Nearly half of American households would face financial hardship within six months if a wage earner passed away.
How to Avoid It:
Review your health, life, auto, and home insurance annually to make sure your policies still meet your needs.
7. Ignoring Tax Planning
Leaving taxes until April can lead to missed deductions—or a surprise bill. 21% of taxpayers file in the last two weeks of tax season.
How to Avoid It:
Keep records throughout the year and talk to a tax professional. Planning ahead can save you time, stress, and money.
8. Not Having a Long-Term Plan
It’s hard to make progress without a clear destination. Managing money month to month without long-term goals can lead to stagnation.
How to Avoid It:
Think ahead. Whether you want to buy a home, travel, retire early, or fund your kids’ education—create a plan that supports those goals and revisit it regularly.
Take Control of Your Finances in 2025
Financial missteps happen, but they don’t have to define your future. With the right tools, knowledge, and support, you can make confident financial choices.
At Korhorn Financial Group, we help individuals and families navigate smart financial decisions and build long-term plans that work in the real world.
Ready to make this the year you take control of your finances? Contact us today to get started.
