Finance Roll

1. Buying more house than you can afford:  You should not spend more than a third of your income on housing.  Specially nowadays with incomes on the line, this is a make or break situation and it has already propelled millions into bankruptcy.  There is no better way to destroy your finances.

2. Not having an emergency fund: This is normally the very first account you should build and leave in cash or a CD, never to be touched unless you need it. Even before you think about your 401(k) or IRA, you need your emergency fund just in case a job loss or serious emergency exposes you to ruin.  A rule of thumb is to have about 6 months worth of living expenses in the fund. Do not think it cannot happen to you.

3. Borrow from your credit card: Credit cards help you to build up a credit history that can lessen the cost of credit throughout your life.  However, they can also kill your credit history overnight if you are not careful.  Do not carry a balance from month to month ever.  Look for another source for a loan if you absolutely have to but not your credit card.

4. Not having basic insurance: This is just like rolling the dice and keeping your fingers crossed that nothing happens to destroy you and your family.  You need home, auto, medical and life insurance, period.  We know others who have been destroyed because of a catastrophic loss.  Just do not do it.

5. Paying for too much education: A basic degree is one of the best investments we can make for ourselves and our children.  But unless we have a very special situation, we need to look closely at the payoff that an advanced degree may bring us.  Unless we are doing something very specialized, it could take us a couple of decades to make up the money lost in the couple extra years or more that we spend in school along with the added costs.  Do the math and make sure it is worth it.