There was no class in school that taught us to make wise decisions with finances, so most of us have learned through trial and error. It is important to identify the mistakes to avoid repeating them, so here are some of the most common financial blunders.

No plan

Although most people have a general idea about their financial goals and how to obtain them, only a small percentage actually have a written plan. Think about the last major vacation you took. You probably mapped out where you were going and what activities you would do. Many of us spend more time planning a two-week vacation than on our entire financial strategy. Not having a written plan is a primary cause of subsequent mistakes.

Lack of cash monitoring

Debit cards and ATMs provide convenient access to our bank accounts each day. Retailers have made it so easy for us to swipe our cards and move on without a second thought about what was purchased or how much we spent on it. Cash involves its own danger because of the lack of a “paper trail.” It is so easy to spend without knowing where it went. Have you ever withdrawn $40 from your checking account one day and wonder what happened a few days later when your wallet was empty? You are not alone. One way to improve in this area of your finances is to give yourself an allowance each week or month. Then, when it’s gone, you just have to resist that $4 cup of coffee.

‘Saving’ in the bank

It is very admirable to save. A prudent strategy includes provisions for short, intermediate and long-term savings. It is very important, however, to be aware of all risks associated with building a store of wealth.

Some risks, like being overaggressive with investments, can be very obvious, but it is sensible to look at other risks such as the future spending value of your savings. We all know things cost more on average each year. The general term for this is inflation, but the best way to describe it is a loss of purchasing power. It means that your dollars will buy less in the future.

There are several ways to protect your purchasing power, including, but not limited to, owning tangible assets in your savings vehicles. Examples include natural resources such as precious metals and oil, as well as real estate.

Deferred account

Although a majority of families have some sort of short-term savings for emergencies, these accounts are often utilized as “deferred spending accounts.” This means they are constantly being drained for impulse purchases and never truly provide the safety of an emergency savings account. Then, when a real emergency arises, debt is often used to cover the expense. This is how many find themselves in a downward spiral with debt.

Remember, effective planning is essential to avoid some of these blunders. We all make some financial mistakes, but the important thing is to apply what we learn from them. Next time (Feb. 1) we will cover additional common mistakes in the areas of tax planning, life insurance and procrastination.

— Josh McCleary is an investment advisor representative at Berthel Fisher & Company Financial Services, Inc. He can be reached at go@ljworld.com.