Thus, it has slipped into the financial lake of fire; I didn’t mean to, however the lousy economy makes it easier to do so. Adding some or all of the following bad habits, I repeat, will make it that much harder to pull off. outside. Some friends of mine had two cars that they financed at higher rates. Car payments kept them cash-flow poor. They couldn’t sell the cars because they had what’s called upside down on them.

This means they owed more than they are worth. There were two solutions to this scenario. First, talk to the friendly banker who is, of course, always ready to help and arrange to sell the car and convert the difference owed into an unsecured loan (which it is anyway), thus lowering the payment. Second, surrender the car to the bank voluntarily. This accomplishes the same thing, however, the bank may not sell the vehicle for the highest possible price, leaving a larger difference. Now the saved car payment can be put away for a beat-up car to fend for itself. This is just the initial step for these people to start getting their financial lives back on track.

Well now such are the economics of being broke. When you’re short on money or the money you never have makes ends meet, you’re constantly running into financial corners. Unfortunately, instead of gradually accumulating wealth over time, you stay afloat or eventually sink into it all by working like a rat on wheels for man.

Along the way, you may have been able to count on raises and bonuses at work and, hopefully, a gradually improving standard of living to help cut losses. But those doors are now closing for many due to the following points:

o Many revenues are not growing like they used to. In fact, when median incomes are adjusted for inflation, they drop below where they were in 1999, the Census Bureau says.

o Inflation and health care costs are chewing away, not eating up a bigger part of what we’re all earning.

o Many people experience broader changes in their income

Obviously, an increase in income is great, but not if you base your spending on getting a few extra hours at work and then your hours are suddenly reduced or your job is eliminated. Mishaps like these, when you’re already broke, can easily push you over the financial brink and lead to the dreaded bankruptcy.

Big mistakes Big consequences

With all these headwinds, it’s more important than ever to get down to the basics of money management. Otherwise, you are only guaranteeing that you will remain broke by continuing to do the following:

Forgetting the really important things. Most “saving money” tips focus mostly on the little things: how to cut back on soda, coffee, or lower your utility bill by a few dollars, chase the kids, and turn off the lights. Those people who are terribly short of cash often spend too much on the big things, mainly accommodation and transportation. You still need a good credit history or score to take advantage of lower interest rates. Here is a way to get it. If your mortgage or rent payment consumes much more than 25-30% of your gross income (I personally go for net) or if your vehicle consumes more than 10% (which includes financing, insurance, repairs and gas) , you will have a very difficult time doing it all month.

Here’s a great tip for estimating what you’ll spend monthly on any car for five years: Double the price and divide by 60.)

Credit card debt, debt, debt, debt… sounds endless, right? I know you didn’t mean to. You had an emergency one month and you didn’t or couldn’t pay the entire bill, and somehow six months later it turned into a mountain. But having credit card debt costs you literally a fortune and puts you at the mercy of credit card companies and then harassment from collection companies. If you can’t pay your bill in full, don’t use credit, it’s that simple. Pay more than the minimum and do your best to pay it off quickly.

Confused about what the needs or wants are. This is a big one, definitely a problem for people at all economic levels. When you’re short on cash, the consequences of deciding you need something that is actually a want can be very devastating and long lasting. Being that our real needs are few, including shelter, food, clothing, transportation and companionship. On the other hand, our wants are endless and will quickly transform a necessity like clothing found at Walmart into a $125 pair of jeans at Nordstrom. The challenge is figuring out what we really need and how to get it for less, to help us regain control of our finances. If you find yourself saying, “I need this, that, or the other,” try to stop for a moment and reconsider whether or not you really need it. You don’t have to live without it forever, just postpone getting it.

Looking only at payments. Many companies survive by making you look beyond the total cost of your purchase. Those payday lenders, rent-to-own stores, and bulky car dealers will make you focus on short-term payments, not long-term spending. Avoid this at all costs. Whenever you’re considering a loan, bring your trusty calculator so you can multiply the payments by the number of months you’ll ultimately be on the hook to get the true true cost of your purchase.

Not being able to run on a budget. You need to track where every penny is spent so you can make smart decisions about how to cut back. Be sure to determine where your money is being used. Technology makes it easier than ever: You can use personal finance software like Money or Quicken, or sign up for one of the online solutions like Mint, Mesabe, Yodlee or Quicken Online.

To the limit living. Every mishap is an emergency without an emergency account. Not having any emergency savings also increases the chances that you’ll bounce a check or two in the future, incurring expensive fees and paying bills late, which will ruin your credit score. A good score helps you get a better loan rate, insurance rate, and even rent a place to live.

Destroying what you have built. Most of us hard workers contribute to some kind of retirement fund, usually that standard is a 401(k) account that they can take to their next job or roll over to an individual retirement account. Almost half at some point get paid when they leave a company. That’s idiotic in my opinion. Ultimately, you will lose your hard-earned fortune in taxes and penalties, and even worse, you will lose the potential growth of that fortune because the money is not there to grow and support you in retirement. People who take this wrong step back and raid their retirement funds will be broke now and old and broke later, putting them in the top 97% of retiring Americans.