Whether we're rich or small, we all make mistakes with money.
Regardless of your income level, it's easy to find yourself prioritizing certain aspects of your money while neglecting others. Many of these habits were ingrained at a young age, but knowing what they are and naming them is a good first step in learning to shift gears.
Discover: America's poorest and poorest states
Learn: 3 things you should definitely do once you reach $50,000 in savings
“The truth is that rich and poor people are equally prone to making money mistakes and do so every day,” says Mafe Akrad, general manager of Coupon Snake, “but when weighed up, it becomes clear that the impact has different effects on both classes.”
Here are some of the biggest money mistakes that affect poor and rich people alike.
Let’s also look at the biggest mistakes people make when it comes to enriching others.
sponsor: Open a new checking account and get access to your early paycheck. Get your early paycheck up to two days early with Discover® Cash Back Debit.
succumb to impulse buying
“Reckless spending can have a negative impact on anyone's budget, but for those with less cash to spend it can be disastrous,” said Marom Anakie, marketing manager at CoinCipher.
Giving in to impulse buying can put you at risk of spending your savings on unnecessary things, he says.
“Before you buy something, ask yourself if it's something you really need or want,” he says. “Make a list of everything you need before you go shopping and be careful to stick to it.”
Check it out: The wealthiest small towns in each state
He also suggested avoiding shopping when you're upset or anxious, as this can motivate you to waste money.
Tim Connon, founder of Paramount Quote Insurance Advisors, similarly noted that impulse buys can add up quickly.
“Every time people stop at a gas station, they want to buy a soda or coffee or other beverage rather than wait until they get home,” Connon said. “They also buy extra sandwiches and other snacks, so people are making impulse purchases.”
Avoiding these impulses can save poor and rich people a lot of money, he said.
Overspending on housing
Akrad said both the rich and the poor make the mistake of spending too much money on housing projects.
“The wealthy are keen to improve the appearance of their homes and upgrade them to suit their own standards and tastes, but they ignore how this decision will affect the resale value of their home,” she explained.
Meanwhile, poor people primarily try to boost the resale value of their homes, she says, which is generally a good idea but a financial mistake because too often both methods end up lowering the value of their homes.
“Poor people often get into the wrong projects that don't actually increase the value of their home and sometimes even reduce the market value of the home,” she said, noting that these include adding a pool or remodeling a garage.
Another home-related financial mistake made by people rich and poor, she says, is always cashing out the equity in their home.
“The problem with this financial transaction is that the more equity you convert into cash, the more debt you accumulate,” she said.
Ignoring home maintenance and expenses
Another mistake made by poor and rich people alike is ignoring the financial aspects of a home, according to HomeZada co-founder John Bodrojczyk.
“They both forget or don't know what preventative maintenance tasks to do or how to budget for renovation projects.”
He said both classes tend to neglect to track all of the costs of housing, such as property taxes, insurance and utilities, and don't continually assess the estimated value of their homes, mortgage balances and assets.
Living Beyond Your Income
Experts agree that poor and rich alike are falling prey to a financial fallacy called lifestyle inflation.
“Whether you're rich or poor, as your income increases, it's inevitable that you'll spend more due to lifestyle inflation,” says Mackinzie Bean, personal finance coach and owner of Moms Make Cents. “When income increases, most poor people tend to spend more as well, believing that it's finally time to buy the things they couldn't afford before.”
She said that many wealthy people, when they gain additional sources of income, tend to allocate more of their income to spending rather than saving.
“Rather than saving, the wealthy tend to improve their lifestyle with each new dollar they acquire,” she said.
Jake Hill, financial expert and CEO of DebtHammer, said this trend is especially evident in the housing sector.
“As the newly wealthy grow, they succumb to lifestyle inflation and spend more and more on luxury homes and apartments,” he explained. “Lower-income earners often overspend on rental housing, especially if they're looking to live in an area with good schools.”
Hill said this financial mistake isn't necessarily avoidable, but doing your best to live within your means and researching average home prices and rents can help you find more affordable housing.
Don't compare prices
The mistake everyone makes, regardless of income or net worth, is not shopping around, says Darius Smith, financial advisor at Wealth is my Worth.
“In fact, this mistake is more prevalent among wealthy individuals,” he says.
Buying from the most advertised and most convenient vendor is a common mistake, Smith added.
One example would be buying insurance from the agent who gives you the first quote and promises you it's the best policy. Another example would be using the same mobile phone company that your whole family uses simply because it's familiar.
Manage within a budget
“People who don't budget think they know a lot about responsible spending,” says Melanie Masson, financial expert at Clearsurance. “Unfortunately, most people, both poor and rich, have unrealistic ideas about how much they need to spend to reach their financial goals.”
Buying things you can't buy
Whether it's a boat or a cup of coffee, experts say using money you don't have to pay off credit cards or take out loans could set you up for financial hardship down the line.
“Rich and poor alike can live paycheck to paycheck, maintaining their current lifestyle while neglecting to prepare for the future,” Musson said.
More from GOBankingRates
This article originally appeared on GOBankingRates.com: 7 Money Mistakes the Poor and the Rich Make Every Day
