Top Ten Personal Financial Mistakes – Part 2: Living Beyond Your Means —

How do you end up in financial distress? There are many reasons, and, when it comes to facing a potential bankruptcy, very often the biggest triggering event is a medical crisis or a divorce. But there are smaller factors that can add up to your finding yourself in a big crisis. This is the second in a series on what one bankruptcy attorney identifies as the “Top Ten Personal Financial Mistakes” people make. His list is useful for all of us to review and consider, and his posts link to helpful resources available on the web. Be sure to click on the link below to his post and check out the resources he provides, too.

Here’s an excerpt from the series by Eugene S. Melchionne, Connecticut Bankruptcy Attorney at

The second most common mistake is not changing your lifestyle to match your finances. Once you have set your personal financial goals, now you have to figure out what changes to make to your lifestyle to achieve those goals. Does this mean a change in jobs or careers? Or does it mean changing your spending habits? Never spend more than you make.

The first step to change is to set up a budget. The Federal Government has a web page set up for this purpose. You can also get a spreadsheet from the Wall Street Journal. Write down everything that has to be paid each month. That means rent/mortgage, food, utilities, insurance, transportation and other basic living expenses. Then write down payments on regular debts; car payments, personal loans, student loans, etc. Now do the same for your income from all sources. That’s the easy part.

It is common for us to borrow for some things — for most of us, how else could we have gone to college (student loans) or bought a house (mortgage)? But we don’t always think carefully about how much our lifestyle (and aspirations) cost us. Borrow with your eyes wide open: How expensive of a school? How expensive of a house? Do you need or just want that more expensive car? Most of us live such busy lives that we take more convenient options offered to us thinking (if we think at all) we will review the decision and adjust, later. Later often becomes “not until it is too late” in terms of how expensive “convenience” can be.

Earlier posts in the series: Failing to Live With Direction

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