It may sound surprising but many people spend more money on a monthly basis than they actually earn. The shortfall is always made up by taking on more debt, whether in the form of credit cards, bank overdraft or payday loan.
Not having a budget
One of the main reason people overspend is that they never created a budget in the first place. Having a budget puts you in control of your finances and allows you not only to live within your means but also plan for your future. Also read my article Money tip #73 - Start big picture budgeting.
Buying a house you can't afford
We all would like to live in our dream home but this home can easily become a 'house of horrors' if we overextend ourselves financially. It's not just the cost of the mortgage that hurts financially but all the utility bills and upkeep costs that increase with the size of your property.
Rely on credit cards for emergencies
One thing you can predict with certainty is that financial emergencies appear at the wrong time. If you build an emergency fund then any unexpected expenditure will not leave you reaching for your credit card again. Read my article Building an Emergency - the what, why and how.
Paying the minimum payment on credit card debt
If you have a balance on your credit you should never ever just pay the minimum repayment amount every month. No matter how small every extra payment each month will have dramatic effect on how quickly you can become debt free.
Save nothing for the future
No matter how the small the amount is, start saving now and you will be surprised how quickly your money will grow. Make sure you open a separate account for these savings so that you are not tempted to dip into them towards the end of the month. It's a good idea to set up a standing order into your savings accounts the day after pay day so your savings are fully automated.
Ignoring tax breaks
If you start saving make sure you make full use of your ISA allowance every year. This means that the growth on your money is tax free. Also make the most of the favourable tax treatment of pension contributions which can help your retirement fund grow quicker.
Overpaying on utility bills
With so many comparison sites available these days it's a 5 minute job to check if you are getting the best deal on your utility bills. Get the right deal now, and checking this on a regular basis, can put extra money in your pocket every month. Read my article top 6 ways to reduce your energy bills for an explanation of what to do.
Automatically renewing car/home insurance
If you pay your car and home insurance monthly by direct debit then almost certainly your policy will be automatically renewed every year. Make a diary note of your renewal dates and then check the comparison sites to make sure you are getting the best deal. And pay annually because it works out cheaper as I explain why here.
Never go food shopping without a shopping list as this will help control your spending on groceries. On all other spending give yourself a budget on a daily basis and don't go over it, doing this will control impulse buying. Plus use the 2 day rule - if you want something then wait 2 days before purchasing it. That way you don't purchase on impulse but buy what you need after careful consideration.