Top Ten Personal Finance Mistakes - Part 2

The second most common mistake is not changing your lifestyle to match your finances. Once you have set your personal financial goals, now you have to figure out what changes to make to your lifestyle to achieve those goals. Does this mean a change in jobs or careers? Or does it mean changing your spending habits? Never spend more than you make.

The first step to change is to set up a budget. The Federal Government has a web page set up for this purpose. You can also get a spreadsheet from the Wall Street Journal. Write down everything that has to be paid each month. That means rent/mortgage, food, utilities, insurance, transportation and other basic living expenses. Then write down payments on regular debts; car payments, personal loans, student loans, etc. Now do the same for your income from all sources. That’s the easy part. Now do the math; subtract the monthly expenses from the monthly income. If the answer is a negative number, stop now and figure out what can change in your monthly bills. Do you sell the car that costs you $800 a month in payments or do you start brown bagging your lunch? Is it time to take a second job or get more hours on the job? Either way, something must change.

Be careful with your changes. Taking second jobs can overtax your ability to work. Cutting your budget too severely will make it hard to adjust. Just like dieting, don’t make things so difficult at first that it is hard to sustain. Now, it’s time to go on to Part 3, Pay Your Credit Cards Off

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