The mistake: Not having a credit card.
Why it can seem smart. If you've ever had mountains of credit card debt, it seems like the smartest decision in the world. Who wants to be beholden to a credit card company?
Why it may be stupid. "Many people believe they are helping themselves by not having a credit card at all when, in fact, you can be hurting your credit score," says Priya Haji, CEO and co-founder of SaveUp, a free rewards program that helps people save and get out of debt.
Haji is correct – at least to a point. If you cannot trust yourself with a credit card, you're probably better off without one. But like it or not, lenders consider whether you have a credit card when deciding whether to offer you credit. If you want a home or a car someday, and you don't have enough money saved to buy either outright, showing that you can peacefully coexist with your credit card may mean you'll get a much better loan than if you don't have a credit card.
If you're really credit-card averse, Haji suggests getting one with no annual fees and making purchases semi-regularly – then paying them off within the month.
The mistake: Not allotting space in your weekly or monthly budget for fun.
Why it can seem smart. You're budgeting, which is serious work. It seems much wiser to budget for things you know you need, like food and rent, than something you don't, like going to the movies.
Why it is stupid. "Just as it's important for people trying to lose weight to allow themselves some 'treats,' it's important for those on a budget to be realistic and include some allocation for fun," says Kevin Gallegos, vice president of Phoenix operations for Freedom Financial Network, a national company that aims to help consumers get out of deep debt. "Depending on income, it might be something as simple as a new bike helmet to enjoy more cycling time, or a small amount for a dinner out each month."
In other words, you're only human. You'll likely do something financially unnecessary or impulsive every month, whether you plan to or not. If you're shrewd, you'll plan for that in your budget, too.