Top Five Financial Mistakes

Are your spending habits sending you and your family to the poorhouse? Even though we live in tough economic times, you don't have to feel powerless. Learn the top five money mistakes you could be making, and take charge of your financial health.

1) Making Financial Decisions Based on Impulse, Need, or What You Deserve. 

Do you believe that because you've worked hard or have a good business that you deserve to have a lavish lifestyle? If you feel sad, does retail therapy brighten up your day? Impulsive financial decisions can spell trouble down the road. "The fact that you need it doesn't mean you can afford it," Dr. Phil says.

2) Tying Self-Worth to Possessions.

Is it important for you to walk into a room wearing a $2,000 watch? Do you get a high from driving an expensive car or flaunting a Fendi bag? Do your possessions broadcast to the world that you've "made it"? Dr. Phil warns: "When you buy things and you finance them, when you know you can't pay for them, that's nothing but theft." There is freedom in saying no. Learn to live smarter and more efficiently, not bigger.

Pay in cash, Dr. Phil says. Charging items to your credit card will only prove to be more expensive in the long run. "With these credit card companies, if you go in and pay $500 for a purse and you put it on a credit card, and you pay the minimum payment, you're probably going to pay $6,000 or $7,000 dollars for that purse," he says.

4) Buying for Kids out of Guilt When There's No Money

Does your child expect to have the latest Xbox game or expect you to buy a BMW for his or her 16th birthday? Parenting out of guilt is wrong, Dr. Phil says. "Your job is to prepare them for the next level of life, and you don't prepare them for the next level of life by having them live a fiction. If there's no money, they need to hear that there's no money," he explains. Your children need to learn that life is not a success-only journey. They need to understand that they can weather hard times.

Do you save for a rainy day, or do you spend your paycheck as soon as you receive it? Even if you set aside a portion of your income each week, and forego unnecessary expenses, such as your morning coffee run, you'll have a cushion to fall back on when times get hard.