Caring Currents

The 10 Biggest Money Mistakes Nearly Everyone Makes

Burning Money
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You're not a big spender, you're reasonably careful with your family's budget, you even try to save when you can. Yet somehow at the end of every month, the credit cards have to come out. (And since you're crazy busy caring for others, it's hard to find time to look back and figure out what went wrong.)

Well, as is clear from the troubles all around us, you're not alone. There are plenty of us family caregivers struggling to make ends meet. Here are the top 10 money mistakes even savvy folks make, and some suggestions for how to solve them.

1. Being "Penny Wise but Pound Foolish." It's all too easy to focus on cutting a few dollars out of the weekly grocery shopping, yet miss big expenses where you could really make a difference. [Reviewing insurance policies] (, for example, could save you hundreds a month, while driving across town to the discount gas station might only net you a few dollars.

2. Overlooking (Or Being in Denial About) Murphy's Law. Life simply does not go the way we want it to; all of us with an ailing parent or other family member can attest to that. So why do we conveniently forget this fact when making financial decisions? Whether we like it or not, chances are very good that at some point in the near future, someone in the family will get sick or end up in a fender bender -- right after we upped the deductible on the health insurance or failed to pay the car insurance. And then that ends up costing us much, much more in the long run. So plan for the worst but hope for the best, as my mother always said.

3. Throwing Away Free Money. That's what your company's 401K matched contribution is -- free money. You put in $100, they put in $100. The problem is, of course, that you have to put in that $100 to get it, and many of us think we can't afford to do that. But can you afford to let that free company money go down the drain? Cut costs somewhere else, but not here.

4. Letting Money Seep Through Your Hands. When was the last time you looked in your wallet and wondered where that $20 bill went? The trick, experts say, is to keep a small notebook with you, and write down the extra little expenses that tend to get overlooked. The drive-through coffee on the way to work, the movie money you handed your teen, that kind of thing. See where it's really going and you can make more conscious choices. (Maybe Junior and Jessica should mow the lawn for their movie money?)

5. Playing Ostrich with Your Credit Rating. Your credit score feeds directly into your financial health. Mistakes, fraud, and identify theft can cost you dearly, while a good credit score translates directly into lower car or mortgage payments. Best of all, you can find out your score for free; a 2003 law entitles everyone to one free credit report a year from each of the three major credit bureaus, Equifax, Experian and TransUnion. (Meaning you could actually get three free reports a year if you wanted to keep really close tabs.)

6. Not Using "Cruise Control" for Savings. If you try to save by waiting til the end of the month, then putting what's left over into savings, well -- you simply won't save. Which is what's happened to most Americans. Instead, the trick is to set up an automatic deduction into savings. Even if it's a small amount to begin with, you'll still be making a start, and you can up the amount later on. Tip: Choose a date for the withdrawal that's soon after a paycheck arrives but not right after the mortgage or rent is due. That way you're less likely to miss it.

7. Not Budgeting Because It's Too Overwhelming. This one's the dirty little secret of family finance -- everyone swears by it, but very few actually do it? The secret, experts say, is to do "spot budgeting" -- focus on one area at a time where you think you can make a dent -- clothing, say, or entertainment -- then keep track of what you spend and look for ways to pare it down. Once you have one area under control, move on to another.

8. Succumbing to Car Lust. Yes, wheels are a point of pride, and that new car smell is tempting. The problem is, new cars depreciate faster than almost any other asset. So if you buy a new car and finance it for five years, within a year or two you'll be "upside down" -- the term for owing more than the car's worth. Then you're trapped if times get tough and you need to unload it. If you can't pay cash, that's okay, just choose a car you can afford to put 20 percent down on. Or better yet, buy a used car, so someone else has already taken the depreciation hit.

9. Overlooking the Cost of Debt. Once we're stuck in the credit card debt cycle, it's hard to get out. But here's a tip: Pay close attention to the minimum payment amount and to the interest rate. If what you're paying every month is less than the amount by which your balance is increasing, you're not just treading water, you're sinking further down. Stay tuned for a future post on getting out from under credit card debt.

10. Letting One Family Member Have Total Control of the Finances. This one's about Murphy's Law, again. If one person's managing the money and something bad happens, (which at some point it likely will), you're in for an even harder time if financial responsibility hasn't been shared. Couples should make sure both people know how much money's in the bank, where the accounts are located, where important documents are stored, and all that important stuff. For those of us taking care of elderly parents, it's a good idea to know your way around their finances too. Just in case.