Most Common Money Mistakes

Everybody makes mistakes. But when it comes to money, even little errors can prove devastating. If you committed one, how can it be fixed?

Paying more than just the minimums
Credit card minimum payments can leave you in debt, for the rest of your life. If you make only the minimum payment on a $10,000 loan at 18%, it will take 42 years to pay off that debt. And it will cost you many times the amount you originally charged.

The best idea is to use credit cards just for convenience, paying them off each month. If you can't do that, at least pay more than the minimum.

Dollar dribbling
At the end of the month, consumers' pockets are empty and they're confused. "Where did all the money go?". It went to dozens of little, regular expenditures. There are people that are living paycheck to paycheck, but they're buying two cups of Starbucks coffee every morning, renting movies at Blockbuster and going to fast-food places for lunch. It adds up really quickly.

These expenses are called "dribblers" because of the slow leaks they create in a monthly budget. The estimation is that the typical consumer dribbles out at least $50 to $100 a month, and ofter far more.

Plugging these leaks is easy once you find them. The solution: Keep a notebook with you and write down every expense, from $1 candy bar to the $3 latte. At the end of the month, add them up and decide whether the expenses are worth budgeting for or whether they ought to be eliminated.

Building a small cushion
Everyone needs an emergency fund. But when budgets get tight, many consumers stop setting money aside for a rainy day, thinking that they can't save enough to matter.

Even if all you can save is $5 a month, bank it, Small amounts add up and can save you from catastrophe if the car or washing machine breaks or you lose your job.

Look at the budget
Some big bills land just a few times a year and wreak havoc with the finances of the forgetful. Auto insurance can be paid just twice a year, for example. Bills for home and life insurance, property, taxes, car registration fees may be sent annually, quarterly or on a bimonthly schedule. And don't forget, of course, holidays and birthdays.

Put out copies of all those irregular bills and divide their costs to come up with a monthly amount that needs to be saved. Also estimate the amount you'll need for holidays and birthday gifts, so you can be saving for these irregular but expected expenses on regular basis.

Read the fine print
There are dozens of little traps in the fine print of financial agreements such as credit card contracts and mortgage loan documents. People who don't read these documents often get blindsided by penalty fees that can cost them thousands of dollars.

When you enter into a financial transaction, read the fine print and keep a copy of the document you signed. If you don't agree with the terms, don't sign the deal. If you do sign, make sure you don't violate the terms of the agreement.

Some traps to watch for: over-limit and overdraft fees; prepayment penalties; and penalty interest rates, which kick in if you have a late payment or two.