Whether you are an experienced and high-performing professional, a newbie, or a student who has just entered society, we have all made some small mistakes when it comes to money, right? The key is how we learn from these mistakes and avoid getting into financial trouble again.

Slow down and look at small money mistakes

We can’t help but worry and regret our careless decisions. But in fact, financial management is a persistent and gradual process. We don’t need to dwell on past mistakes, but we do need to revisit them: What happened? Why does it happen? More importantly, we can learn from “other people’s stories” to avoid falling into the same money trap ourselves:

• Anna’s story: When I graduated college, I had a student loan. Since the salary of my first job after graduation was not high, the lender gave me an option: I could defer my repayments. So, I chose to delay payment as long as possible. But I overlooked one detail: During that time, my loan accrued additional interest. Originally, if I had been a little frugal in other areas, I would have been able to pay it off by now, but I currently owe thousands of dollars because of the interest.
• Lee’s story: My family’s income was not high, so I grew up thinking that buying clothes on sale at the cheapest stores was the best deal. Three for $10 is better than one for $20, right? It wasn’t until I grew up that I discovered that spending more money on better quality products saves more money in the long run. In addition, the pile of cheap clothes made my wardrobe a mess and caused even more psychological stress.

Why is financial literacy important?

From the stories, we can find one thing in common: a lack of financial knowledge. Some people have grown up in an environment rich in financial knowledge and resources. They are more familiar and experienced with purchasing decisions and know how to make wise money decisions with long-term considerations. However, if your resources are limited, you will often continue to perpetuate the spending habits of your family. Unfortunately, this critical life skill is often not adequately covered in schooling, making it difficult to build financial knowledge before accidentally making a mistake. With good financial literacy, you won’t be seduced by tempting one-click purchases on social media or TikTok but will know how to spend your money where you’ll get the most bang for your buck. Here are three financial literacy tips for a better life:

• You know where every penny is going. This means you are fully aware of your income and expenses, create a budget and stick to it, and manage possible debts (such as loans, credit cards, etc.) in a planned way.
• You Have an Investment Fund Prepared—and Know When to Say No By building up savings, you can not only respond to emergencies but also be prepared for entrepreneurial and investment opportunities. More importantly, you’ll be able to recognize and avoid the so-called “get rich quick” trap.
• Believe in quality over quantity. This includes everything from kitchen supplies to sneakers or yoga clothes to mutual funds and car insurance that will cost you your precious cash.

Practical tips for avoiding money traps

• Create a budget and stick to it: Remember to set aside some money in your budget as savings or an emergency fund. Be honest about “emergencies” and don’t use your emergency fund for non-urgent matters. 3-6 months of living expenses is a safe minimum.
• Avoid affordable debt: Limit debt to necessary large expenses, such as a mortgage or car loan. Beware of the pitfalls of 0% interest rates and don’t just take the words at face value.
• Log and track your spending to ensure you have a clear picture of your money flow and find ways to reduce unnecessary spending.
• Avoid impulse purchases. Take the time to do your research and make sure the cost matches the quality.

No one is perfect when it comes to money, and we all make mistakes, whether it’s impulsively buying a $3,000 handbag when you already own five, or not reading the fine print on a credit card offer. The good news is that we can always learn from experience and do better. Money is an indispensable part of our lives, and financial management skills are the key to making us move more steadily and further on our money journey. Don’t forget to save the tips mentioned in this article and quickly review your financial management methods!