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Personal Finance mistakes everyone should avoid

Six of the most common financial mistakes that often lead people to major economic hardship. Even if you're already facing financial difficulties, steering clear of these mistakes could be the key to survival.
Excessive Spending
Great fortunes are often lost one dollar at time. It may not seem like a big deal when you pick up that double-mocha cappuccino, stop for a pack of cigarettes, have dinner out or order that pay-per-view movie, but every little item adds up.
Never-Ending Payments
Ask yourself if you really need items that keep you paying for every month, year after year. Things like cable television, subscription radio and video games, cell phones and pagers can force you to pay unceasingly but leave you owning nothing.
Living on Borrowed Money
Using credit cards to buy essentials has become somewhat normal. But even if an ever-increasing number of consumers are willing to pay double-digit interest rates on gasoline, groceries and a host of other items that are gone long before the bill is paid in full, don\'t be one of them. Credit card interest rates make the price of the charged items a great deal more expensive.
Buying a New Car
Millions of new cars are sold each year, although few buyers can afford to pay for them in cash. However, the inability to pay cash for a new car means an inability to afford the car. After all, being able to afford the payment is not the same as being able to afford the car.
Buying Too Much House
When it comes to buying a house, bigger is also not necessarily better. Unless you have a large family, choosing a 6,000-square-foot home will only mean more expensive taxes, maintenance and utilities.
Treating Your Home Equity Like a Piggy Bank
Your home is your castle. Refinancing and taking cash out on it means giving away ownership to someone else. It also costs you thousands of dollars in interest and fees. Smart homeowners want to build equity, not make payments in perpetuity.
The Bottom Line
To steer yourself away from the dangers of overspending, start by monitoring the little expenses that add up quickly, then move on to monitoring the big expenses. Think carefully before adding new debts to your list of payments, and keep in mind that being able to make a payment isn\'t the same as being able to afford the purchase. Finally, make saving some of what you earn a monthly priority.

Guest Author

Fauzan Shaikh

Finance Graduate
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