Avoid budget blunders
Cut out all the fun stuff.
All budgets should allow for entertainment. Think about where your recreation priorities lie and add up how much you spend each month on those activities. If the total is more than 10 percent (5 percent is ideal) of your total household budget, it's time to scale back. But don't blunder by eliminating recreation altogether or your best-laid plans will eventually self-destruct.
Be hit or miss with savings.
When it comes to money management, slow and steady wins the race. Once you've determined how much of your monthly income can be allocated to short- and long-term savings, make your deposits consistent by using automatic payroll deductions. By saving just $100 a month in a money market account earning 5 percent interest, you could accumulate approximately $6,800 in five years
Overuse your debit cards.
Money doesn't grow on trees, of course, but debit cards sure fuel the impression. Allot yourself a specific amount of cash for purchases during the week. Implementing a strict cash-only diet not only puts spending habits in perspective, but also actually helps you think before making that impulse buy.
On the flip side, a recent Roper survey shows that people who save just 5 percent of their income are much happier overall than those who don't save. These are the people who are most likely to keep spending in control and pay their credit card balances in full each month. Then they have a little leftover to put away each payday.
Pay only the minimums on cards.
There's no better way to perpetuate debt -- or waste your money -- than to carry a credit card balance. Making only the minimum monthly payments will cost you thousands in interest fees that could otherwise be applied toward savings or entertainment. Send as much as you can to your credit card company each month.
Live without emergency savings.
If you haven't set money aside for a rainy day, you're one job loss or illness away from financial ruin. Most consumers should save between three and six months' worth of living expenses in a liquid interest-bearing account. Those who are self-employed or work in a high turnover industry should have up to a year's worth tucked away.
Spend more than you earn.
It's the cardinal rule of household budgeting -- live within your means. In our instant gratification society, however, it's easier said than done. Experts insist living with less begins with changing your spending philosophy. Learn to moderate, resist reckless spending and, above all else, don't take another vacation until you've got the money in the bank. You'd be surprised how gratifying it is to bid farewell to the financial treadmill.
