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Common Money Mistakes that You might be Making

Common Money Mistakes that You might be Making
by Brad Trupp (c) 2008

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Lots of people make the same common mistakes when it comes to personal finance -- and the first step to eliminating mistakes is to recognize them. This quick guide helps you identify and avoid some of the more common mistakes.

Credit Score

Mistake number 1 is having no idea what your credit score is -- or what it means.

Your credit is crucial these days. Despite this fact, most people do not really know much about their own credit score or report.

It is not enough to receive a copy of your credit reports on an annual basis. You should read it over thoroughly and make sure you are clear on just what information is listed.

Take the time to dispute any errors on your report and be aware of your rights when it comes to your credit report.

Letting the Pennies Slide

Mistake number 2 is letting the pennies slide.

For many of us, little spending habits can add up and get us down. A newspaper on the way to work, a soft drink from the machine every day at lunch, and other little expenses add up very quickly.

It is important to figure out where your money is going -- even if you wind up having to track every last one of your expenses to do it. Not all of your little indulgences need to be a problem, but would you rather have that extra chocolate bar or would you prefer to go on a ski vacation next winter?

Letting the Dollars Slide

Mistake number 3 is letting the dollars slide.

This often becomes a problem when you start to get their pennies under control. While worrying about saving pennies, it is easy to lose sight of the bigger picture.

One symptom is spending more time and effort on saving a few cents than they are actually worth.

Did you drive half-way across town to save only a dollar or two? If so, you are paying more attention to your pennies than to your dollars. Aside from the cost of the drive, there is the cost of lost opportunity. What else could you of done in that hour's time that you wasted driving around that would provide more value?

Rewarding Yourself for the Ordinary

Mistake number 4 is rewarding yourself for the ordinary.

Do you feel the need to reward yourself just for making it through the work week? Perhaps a dinner out because it is Friday?

While going out to dinner is not necessarily totally destructive to your overall bottom line, the idea that you deserve a reward for something that you ordinarily do anyway will hurt you in the long run. Other rewards may include regular purchases of books, games, or movies. These constant expenditures do drag down your ability to save.

Your rewards really should be treats for extraordinary feats and can be larger items instead -- ten dinners out might be the same cost as the new game console you want.

Save rewards for something big, like earning a certification or getting a promotion.

Putting Others First

Mistake number 5 is putting others first.

Charity is good but realistically you have to put yourself first when it comes to personal finance. While it feels good to help others, you still need to strike a balance between the two.

Be sure that your gifts are within your means and budget.

Conclusion

Recognize the mistakes and take action. Things can only improve.

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