How to avoid personal finance mistakes that cost a lot of money

A woman looking at her checkbook with a resigned expression

Personal financial management will allow you to avoid mistakes that end up costing you a lot of money. Flickr photo.

A lot of people make financial mistakes by spending money without thinking. Living for today and forgetting about tomorrow can get you in trouble. Of course, nobody is perfect and it’s no fun being a tightwad. But personal financial management will help you avoid big mistakes that hold you back from where you really want to be.

Create a budget to avoid personal financial mistakes

Having no budget is the biggest mistake. Spending without knowing where your money is going will leave you broke. But a budget just isn’t a plan for how you would like to spend your money. reports that to create a budget you have to start tracking your expenses first. Tracking your spending for a month takes discipline, but once you know where your money is going, you can start making better decisions about where to allocate your funds. But don’t be too conservative. A budget that cuts all the fun out of your life is doomed to fail.

A budget helps you start saving money

Creating a budget helps you start saving. Even if your budget looks like it has nothing left for saving you could be wrong. recommends starting small. You’ll be surprised by how quickly even $20 a paycheck adds up. Keep in mind nickles and dimes add up to dollars. Make your own coffee, pack a lunch and fill a water bottle for work. If you take a small side job, like coaching, tutoring or tending bar, use the cash for your spending money and put away the savings from your regular paycheck.

Avoiding late payments

Making late payments on bills and loans is a tremendous waste of money. offers some good tips about avoiding late payments. The easiest way to avoid late payments is to set up automatic payment with your bank account. But if you’re not confident in your cash flow, there are more traditional ways — like not stashing unopened bills in a drawer. Set up your own due date a week before the actual payment is due, and write it on the calendar. Set up a free e-mail or cell phone reminder from creditors that offer them. Many companies will also let you rearrange the due dates better suited to your cash flow.

Use cash advances wisely

Don’t take out debt for living expenses. A payday loan or online cash advance is a valuable service for emergencies like medical bills, car repairs and traffic tickets. But to finance lattes from Starbucks, the dress on sale you can’t live without or beers with the fellas after work, using personal loans and installment loans is a bad idea. When it’s a good idea to get a payday loan, only borrow exactly what you need to resolve the emergency — and by all means make sure you pay it back on time.