You can be on Entrepreneur’s cover!

The 4 Dumbest Money Mistakes People Make and How to Stop Making Them, According to Shark Tank's 'Mr. Wonderful' If you make these common budget blunders, multi-millionaire money master Kevin O'Leary says you're headed for disaster.

By Kim Lachance Shandrow

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

ABC | Bob D’Amico
Kevin O'Leary

"What does it cost you to be alive?" If you don't know the answer, you could be headed for a financial trainwreck. If not now, probably soon, says Kevin O'Leary.

When it comes to his own money, the shrewd, sharp-tongued Shark Tank star has long managed it meticulously, even when he was a shy kid growing up in Montreal, Canada. The young "Mr. Wonderful," now a silver-haired 61, carefully scrimped and saved a percentage of every dollar he accrued, whether earned or gifted. And the multi-millionaire mutual funds magnate still does.

Recently, on the set of Shark Tank, we asked the frugal finance whiz what he thinks the worst money mistakes people make are and how to best avoid them. Here's what he said:

The mistake: Spending on 'crap' clothing you won't wear.

"Most people buy more crap than they use. This includes men and women alike, especially when it comes to clothes. They love the feeling of clothing shopping, but the truth is, if you actually look at your closet, you probably wear the same 20 percent 80 percent of the time, and the rest of the stuff you bought is wasted."

Related: Shark Tank's Kevin O'Leary: Having Dyslexia Is a 'Superpower' in Business

The solution: Invest in high-quality clothes and wear them out.

"If you're going to buy clothing or fashion accessories, make it something really good that's going to be timeless, that you're going to spend a lot of money on and spend a lot of time thinking about, and that you're actually going to use. Save your money and put it toward quality items and be very selective. It'll pay off in the long run. I wear the same suit every day. I have 20 of them, so I don't have to worry about my style anymore. I travel with four at a time and I burn them out Then I throw them out or give them to charity."

The mistake: Not knowing your monthly nut.

"What I find so remarkable, and this includes very wealthy people I know, is nobody knows what they're monthly nut is. Whether you're single, married, a single parent or otherwise, most people don't know what it costs them to live every 30 days, and that's living on the edge."

Related: Shark Tank's Kevin O'Leary Says Married Entrepreneurs Must Do This or Risk Divorce

The solution: Calculate your cost of living and budgeting accordingly.

"Write down everything. All of your habits of spending. All of your income. All of the extra ways you make money. Capture it, down to the penny, over a 90-day period. Do it with pen and paper. You don't even need a computer for this. Then do what needs doing -- budget accordingly and stick to it."

The mistake: Spending more than you make.

"Not knowing what's coming in and what's going out puts you at risk, in a state of never getting ahead. Most often, you'll find you're spending more than what you're bringing in."

The solution: Tighten your belt and fast.

"It's simple and requires discipline: Spend less and save more. Adjust your lifestyle because overspending manifests itself usually in credit card debt, which is so expensive that it buries you."

Related: 10 Questions to Ask When Working With an Accountant

The mistake: Racking up credit card debt.

"A credit card is a horrible thing. Under no circumstances should you have one, let alone more than one, not unless you can fully pay them off each and every month. Even then I'd avoid them."

The solution: Ditch those bad cards for good.

"Pay off your credit cards, then cut them up. You won't regret it. It's the best thing you can do to put yourself in a better financial position right now."

To glean more of O'Leary's advice, check out Shark Tank's Season Eight premiere on your local ABC station. It airs on Sept. 23 at 9 p.m. ET.

Kim Lachance Shandrow

Former West Coast Editor

Kim Lachance Shandrow is the former West Coast editor at Entrepreneur.com. Previously, she was a commerce columnist at Los Angeles CityBeat, a news producer at MSNBC and KNBC in Los Angeles and a frequent contributor to the Los Angeles Times. She has also written for Government Technology magazine, LA Yoga magazine, the Lowell Sun newspaper, HealthCentral.com, PsychCentral.com and the former U.S. Surgeon General, Dr. C. Everett Coop. Follow her on Twitter at @Lashandrow. You can also follow her on Facebook here

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Editor's Pick

Resumes & Interviewing

Build a Better Resume with This $35 Subscription

AI Resume Builder promises to help you apply to jobs twice as fast.

Side Hustle

He Took His Side Hustle Full-Time After Being Laid Off From Meta in 2023 — Now He Earns About $200,000 a Year: 'Sweet, Sweet Irony'

When Scott Goodfriend moved from Los Angeles to New York City, he became "obsessed" with the city's culinary offerings — and saw a business opportunity.

Marketing

I Got Over 225,000 Views in Just 3 Months With Short-Form Video — Here's Why It's the New Era of Marketing

Thanks to our new short-form video content strategy, we've amassed over 225,000 video views in just three months. Learn how to increase brand awareness through short-form video content.

Business News

Samsung Makes 6 Day Workweeks Mandatory for Executives as the Company Enters 'Emergency Mode'

Samsung said its performance "fell short of expectations" last year. Now executives are required to work weekends.

Productivity

6 Habits That Help Successful People Maximize Their Time

There aren't enough hours in the day, but these tips will make them feel slightly more productive.

Leadership

You Won't Have a Strong Leadership Presence Until You Master These 5 Attributes

If you are a poor leader internally, you will be a poor leader externally.