Finance: 5 financial choices that will haunt your money for life

Overspending can wreak havoc on your financial life.

If you're not invested in the stock market, you could be losing out on a lot of money.

Everyone makes financial mistakes, but some people know how to work their way out of them.

When it comes to money, bad decisions can pile up and affect you for the rest of your life. Fortunately, these mistakes can be avoided — and even fixed.

Below are five common financial mistakes that can haunt your money for life.

Sitting on the markets sideline

While the stock market is soaring to new highs, half of Americans are being left out of the gains. Bankrate found that only 46% of adults have money invested and only 18% of the youngest adults are involved in the market.

While many people fear losing money, the true concern should lie in missing out a potential fortune. Over the long-term, a well-balanced portfolio will always come out with a net gain. With compound interest at stake, investing as early as possible is the smartest move.

If you're not already in the stock market, now is the time to start. If you have a longer investment period in mind, it could make sense to take on more risk.



Not having a rainy day fund

There are so many things that can go wrong in life and someone who is smart with their finances will be prepared for anything. Expensive emergencies like a car breaking down or a medical emergency can happen whether you are ready for it or not.

Experts recommend your emergency savings be able to support you for three to six months. That's a conservative estimate for how long it takes to find a new job after being fired, for instance.

Having enough money in an easily accessible emergency fund prevents you from taking out loans in desperation or from going into debt.



Waiting to pay off debt

After investments and emergency savings, you may feel your paycheck dwindling. That feeling will only get worse if you don't pay off outstanding debts.

From student loans to mortgage payments, debts are pesky. But the thorn will only get sharper over time if you ignore them.

A team of researchers writing in the Harvard Business Review this year suggested paying off the largest debts with the highest interest rates first. Credit card interest rates are notoriously high, so paying those off before going after more manageable debt, like student loans, may be a smart move.

If you're stressed out by debt, these strategies may help.



Not asking for a pay raise

Bankrate found that only 48% of working Americans got a bump in salary over the last year, and often because they aren't asking for it.

Chickening out of a salary negotiation, especially at the beginning of your career, could cost you $1 million in lifetime earnings.

By understanding your worth and the value you provide at work, you can earn more every year and maybe even retire early. If your company won't give you that raise, it may be time to search for a new job where you are payed in accordance to your value.



Spending too much money

Overspending is a problem many people fall victim to, but you shouldn't spend all the money you make, according to Eric Roberge, a certified financial planner and founder of Beyond Your Hammock.

"Spending right at your means, even if you don't go over and spend more than you earn, is like trying to take a race car up to 200 miles an hour with a warped wheel," he wrote in an article on Business Insider.

"If anythinggoes wrong — you hit a bump, you swerve, whatever — you're done. There's no second option when you're going full throttle in your financial life. There's no safety net."

Leaving room in your budget to save some of your earnings will set you up so you're not scrambling for money when you need it most.

In other words, learn to live below your means.



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