Carrie Schwab Pomerantz
(set ital) Dear Readers: As careful as you might be in managing your money, there are certain mistakes that can sneak up on you. You might be tricked into thinking they're no big deal, but even seemingly small mistakes can have some pretty disastrous results. Here's my list of the 10 scariest money mistakes -- and what you can do to avoid them. (end ital)

1. Living beyond your means. When was the last time you put something on a credit card because you didn't have the money to buy it? Or how often have you chosen a high-priced item when a lower-cost version would work just as well? Do this regularly and you can easily end up with a stack of bills and not enough money to cover them. The solution? Create a budget you can live with. Divide your expenses into two categories: needs and wants. Put dollar amounts beside each entry. Then, add up your income. Can you cover everything? If not, you need to prioritize. Pay for all the necessities first, then pick and choose the extras you can handle with cash. You'll enjoy them more -- and you won't have to fear the bill.

2. Putting retirement last. Retirement doesn't seem so scary when it's far in the future, but when you're staring it in the face with very little savings, it can make you turn as white as a ghost. So put retirement first -- even before saving for a house or a child's education. Contribute at least enough to your 401(k) to capture any company match. If you don't have a 401(k) -- or even if you do -- open an IRA and contribute as much as you can toward the yearly maximum. The earlier you start, the more time you have for your savings to grow.

3. Not having an emergency fund. Have you ever been faced with a medical crisis or a job loss? These are emergencies that can really make your hair stand on end if you're not prepared. Ideally, you should strive to have three-to-six months of necessary living expenses easily accessible in a savings or money market account or short-term CD. In retirement, it's wise to have at least a year's worth of cash set aside to cover expenses.

4. Carrying credit card debt month to month. Let's say you have a $5,000 balance on your credit card and you're making the minimum monthly payment (usually interest plus 1 percent). It would take 264 months (22 years!) to pay this balance off. Plus, you'd end up paying $5,330.33 in interest -- double the amount you initially spent. Those numbers are pretty terrifying! Always pay as much as you can each month to bring your balance down quickly.

Carrie Schwab Pomerantz

Carrie Schwab Pomerantz is a Motley Fool contributor.

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