Mistake #1--  Failing to Have an Overall Financial Plan

If your finances are not guided by a plan and goals, you may have no direction. First, think about what goals should be accomplished and what is an appropriate financial picture. Ask such questions as:

- Do you want to retire at age 55 with a certain amount of money in the bank?

- Do you want to get out of debt?

- Do you want to save a set amount per year toward your child’s education?

Not having a plan may cause you to become unfocused about your finances. Remember to make goals realistic and achievable. See the About-Goal-Setting.com Web site of the “Goal Setting Success Guide” for tips on financial goal setting. Alternatively, make use of goal-setting worksheets like the ones at http://www.about-goal-setting.com/goal-setting-forms.html.

Mistake #2--  Failing to Pay Consistent Attention to Your Finances

No plan will succeed if it is not reassessed and readjusted. Make a habit of paying regular, consistent attention to all aspects of your finances. The following are hypothetical examples of how financial tasks could be scheduled:

- Balance checkbook monthly.

- Reassess retirement investments yearly and rebalance, if needed.

- Track expenses daily.

- Assess net worth monthly, quarterly, or yearly.

Decide what tasks need attention for your particular financial situation, and do these regularly.

Mistake #3--  Not Taking Advantage of Employer-Sponsored Options Such as 401(k) Plans

Many employees never take advantage of participating in employer-sponsored 401(k) plans. These plans offer tax advantages. In many cases, employers match a percentage of your contributions – essentially free money for you.

Make a point to learn about your employer’s 401(k) plans or other retirement benefits.

For information on 401(k) plans, check out http://www.401k.org or http://www.irs.gov/taxtopics/tc424.html.

Mistake #4--  Living Above Your Means

It is easy to be tempted into living above your means. Easy access to credit makes it attractive to buy now and pay later. Before long, you may be living above your means and spending more than you are taking in. Once this cycle begins, it can become increasingly difficult to catch up.

One way to ensure that you are living within your means is to track both income and expenses carefully. For some people, it also means eliminating credit cards and only using available cash for purchases.

Many online resources, such as http://www.moneyinstructor.com/art/budgetcreate.asp or http://creditfederal.com/track-expenses.html can help with ideas, worksheets, or software to set up a budget and begin tracking expenses.

Mistake #5--  Failing to Diversify Investments

If investing for retirement, college education, or some other goal, make sure your investments are diversified properly according to your goals. How you diversify investments will depend upon your investment timeline (i.e., how long before investment money must be taken out) and your personal aversion to (or comfort with) risk.

To understand the basics of diversification, check out http://www.ici.org/i4s/bro_i4s_diversification.html.

Mistake #6--  Delaying Investing for the Long Term

Do not make the mistake of thinking you are too young to invest for retirement. Because of the magic of compounding, someone who begins investing for retirement in their 20s will be in much better shape than a person who begins investing (with equivalent amounts) in their 30s or 40s.

The Bankrate.com article “Start now and be rich in retirement” illustrates the importance of letting your money compound over time, and investing early.

Mistake #7--  Failing to Establish an Emergency Fund

An emergency fund is self-explanatory – money set aside for emergencies. Ideally, the fund is kept in an easily accessible (liquid) account. You may decide ahead of time what constitutes an emergency in your household.

Financial experts generally recommend at least three to six months of living expenses in an emergency fund. More is better. However, begin saving now, even if three months of expenses seems like a huge amount. Establishing the habit of paying yourself first, even with little amounts, is just as important as the eventual growth of your fund.

See the ConsumerismCommentary.com article “50 Tips to Help Establish Your Emergency Fund” for tips on creating your emergency fund.

Mistake #8--  Failing to Establish a Will or Estate Planning

Putting off estate planning is a bad idea. It will likely cost your loved ones money and time. To learn more about wills and estate planning, go to the American Bar Association’s Web site at http://www.abanet.org/rpte/public/home.html.

Mistake #9--  Holding High Interest Credit Card Debt

High interest rates can quickly eat away at your income and make it impossible to save. Compare using this hypothetical example. If you have a debt at a high interest rate, the amount of interest paid will be much greater than one at a lower rate. Specifically:

- A $5,000 debt that you pay 17% compound interest on will increase to $11,670 after five years.

- A $5,000 debt that you pay 5% compound interest on will increase to $6,416 after five years.

Mistake #10--  Failing to Take Advantage of Tax Breaks

The tax code is complex. However, you may qualify for many existing tax breaks. Some of these include:

- Charitable deductions

- Business expenses

- Mortgage interest deductions

- Pre-tax contributions to a qualified retirement account or health savings account.            

Search the Internal Revenue Service (IRS) Web site at http://www.irs.gov for information about tax deductions.