The Five Biggest Money Mistakes

Are you in debt? During tough economic times, families panic about money and some even find themselves one paycheck away from being on the street. Do you and your family know what to do to survive? Dr. Phil shares the five biggest money mistakes people make and what you can do to change your financial future. 

1. Believing in the Myth of Fixed Expenses

When people look over their budget, they often find a few fixed expenses that they claim they can't live without. "There are no fixed expenses," Dr. Phil says. "If you can't pay it, it has to go away. There's nothing that can't go away." Everything but survival needs can be put to the side until you can afford to pay for them without going into debt.

2. Cashing Out Your 401(k)

Unless it's an absolute dire emergency, you should never cash out your retirement fund. It may give you a short-term fix, but the day will come when you wish you had that money. Instead, find a way to make new money as a way to solve your cash flow needs.

3. Believing that Fixed Income is the Only Answer

You can only move your money around from one credit card to another so many times before there is none left. Becoming entrepreneurial can make the difference between sinking and swimming. "Don't think that just because you're on a salary, that that's the end of our earning power," Dr. Phil says. Try to create a home-based business that can generate extra income for the household.

4. No Emergency Back-up Plan

Surviving a crisis takes preparation. We live in a 70 percent second-income society. It used to be that this second income was used as a bailout when a crisis, like a job loss or health disability, prevented the breadwinner from working. The other spouse could go to work and earn a paycheck to bridge the gap. Now, both spouses work and often spend all the money earned, leaving little or no savings. "You can not live and spend like you think you're always going to be at the most money you've ever made," Dr. Phil warns. It is important to establish a savings account that you do not access unless it's an emergency.

5. Living Beyond Your Means

It's math, it's not magic. It doesn't matter what you think you deserve, it doesn't matter what you think you need, it doesn't matter what you think you have to have to fit in. "If you don't have the money, then you don't need to be incurring the responsibilities, the debt and the obligation," Dr. Phil stresses. The bottom line is if you just simply can't afford what you have, like a house, car, boat or other item, then you must get rid of it and free yourself from that financial obligation.

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