Money Management 101: 10 Most Common Mistakes

Avoid these budgeting pitfallsas you navigate the current financial climate

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Having a good plan is the key to money management. But it's not enough to know what you should do. If you want to avoid taking a step backward for every step forward, it is vital that you steer clear of common money mistakes that can drain your wealth, or misapply it. Here are 10 common money mistakes:

1. Spending more than you earn
This is rather common. Many live beyond their means for a variety of reasons. This is a mistake that can put you behind for your entire life. True wealth can only be built if you learn how to control your spending and keep your expenses within the limits of your income.

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2. Impulse buying
While the occasional splurge will not ruin your plans for good money management, habitual impulse buying will. When you buy as the mood takes you, without considering your purchases, you soon lack the discipline to stay within your means.

3. Failing to save enough
Many fail to save what they need. If you want a stable and financially secure future, it is important to plan ahead, saving for retirement (preferably in a tax-advantaged account) and building up an emergency fund. These savings mechanisms will protect you in the event of unexpected financial obligations.

4. Paying high interest
Sometimes you have to borrow money. When you do, it is important to get the lowest interest rate possible. Shop around and know what you are eligible for. High interest drains your resources away, and you receive no tangible goods or services in return.

5. Carrying a credit card balance
When you carry a credit card balance, you pay a high rate of interest. Every month that you have a balance, that is another month that you have to pay interest that does nothing for you.

6. Paying only the minimum on your credit card
It seems convenient, the low minimum payment on your credit card. However, your minimum payment is designed to help the credit card company by keeping you in debt (and paying interest) for as long as possible. By paying only the minimum, you can take years to pay off your credit card -- and pay back triple or even quadruple what you originally borrowed.

7. Not investing
Many are concerned about investments right now, but not investing can be a huge financial mistake. Investing helps you put your money to work for you. Long-term stock investments usually gain over the long run. If you are concerned about stocks, you can make cash and near-cash investments in high yield accounts: CDs, money market, low-risk bond funds and other similar financial instruments.

8. Thinking only of the short term
It can be difficult to think long term right now, but failure to plan for the future can leave you in a bind.

9. Greed and fast fixes
Many are blinded by the promise of fast fixes and the allure of quick wealth. They "invest" a great deal of money in these plans, or spend their time chasing the next "big" thing, instead of persistently practicing the money management techniques that will truly help them long term.

10. Not giving back
It is important to give back of your abundance. You will find that when you give, your finances seem to do better.

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