Fixing common money mistakes

Bruce McClary, communications director for Clearpoint Financial Solutions, recalls a senior on a tight budget who was getting along fine until a $250 car repair sent her into a tailspin. She borrowed money at double-digit rates that she couldn't pay back, which was then compounded with late fees. Her mistake was simple: She had no emergency fund.

What are Americans' most common financial mistakes and how can they be fixed?

Dollar dribbling

At the end of the month, consumers' pockets are empty and they're confused. "Where did all the money go?"

David Jones, president of the Assn. of Independent Consumer Credit Counseling Agencies, knows the answer: It went to dozens of little, regular expenditures.

"We have customers who are living paycheck to paycheck, but they're buying two cups of Starbucks coffee every morning, renting movies at Blockbuster and going to fast-food places for lunch," he says. "It adds up really quickly."

McClary calls these expenses "dribblers" because of the slow leaks they create in a monthly budget. He estimates that the typical consumer dribbles out at least $50 to $100 a month, and often far more.

Plugging these leaks is easy once you find them, McClary adds. The solution: Keep a notebook with you and write down every expense, from the $1 candy bar to the $3 latte. At the end of the month, add them up and decide whether the expenses are worth budgeting for or whether they ought to be eliminated.

Forgetful budgeting

Some big bills land just a few times a year and wreak havoc with the finances of the forgetful, McClary says.

Auto insurance can be paid just twice a year, for example. Bills for home and life insurance, property taxes, car registration fees -- even some water and waste collection bills -- may be sent annually, quarterly or on a bimonthly schedule. And then, of course, there are holidays and birthdays.

"We see people all the time who think they've got all this extra money some months, so they go out to dinner or fly to New York," McClary says. "Then the periodic expense that they've forgotten about comes up. They're suddenly not feeling so good anymore."

Pull out copies of all those irregular bills and divide their costs to come up with a monthly amount that needs to be saved. Also estimate the amount you'll need for holidays and birthday gifts, so you can be saving for these irregular but expected expenses on a regular basis.