If in the last years you have made mistakes in your personal finance that brought you into the financial situation that you are in now, it is time for you this year, as it is still the beginning of 2009, to recognize the mistakes that you had made and fix it.

Here are the most common deadliest money mistakes that people make.

1. Ignoring Your Credit Score

As credit crunch and rising defaults have scared many lenders, your credit score is now probably the most important matter today. With a credit score of 750 or above, you will get a lower interest rate on mortgages, auto loans, private student loans or credit cards. Neglecting your credit score and letting it drop low will cause you to have to pay higher interest rate on all the loans that you apply for. Additionally, landlords and insurance company also evaluate the credit score of applicants.

2. Carrying A Huge Balance In Your Credit Card

In the beginning, it was very easy to believe that carrying a balance on our credit cards did not matter all that much. But now we can see how credit card companies slash credit lines or increase interest rates outrageously high. A 8.79% credit card interest rate today can soar as high as 24% the next day, if you make even one mistake in paying late.

The Newest version of the FICO credit score computing is also more sensitive to how big your credit card balance is. A too big balance on your credit card can damage your credit score. If you carry a huge balance in your credit card, one of your projects for this year should now be paying it off completely.

3. Overspending On Auto Loan Or Home Loan

This also includes the mistake of overspending on education loans. Your housing costs should never exceed more than 25% of your income. Likewise, your transportation expenses should not be more than 10% of your income. This includes auto loan payments, fuel costs, maintenance and insurance.

Here is a good tip for you that I found on MSN Money about how much you should be spending on auto loan, home loan and education loan:

• If you can’t afford a house with a 30-year, fixed-rate mortgage, you can’t afford the house.
• If you can’t afford a car with a 20% down payment and a four-year loan, you can’t afford the car.
• Your total borrowing for any education shouldn’t exceed the amount you expect to earn your first year after graduation.

4. Not Maintaining Emergency Fund

A lot of people have tried saving money for emergency and at one point some unexpected expenses pop up and completely emptied your savings. Many just stop trying to save afterwards. Others have so much access to credit that they don’t think it is necessary to have an emergency fund. But this has to change soon. Lenders are now lowering their credit limit and shutting down home equity lines. Therefore cash on hand will become more and more valuable. If you do not have any emergency fund already, it is the right time for you to start building one.

5. Making Gullible Choices

Many people are trapped in a critical financial situation because they made some decisions that are far from wise. Some of the common decisions are:

• Falling into a ‘get-rich-quick’ trap
• Taking a loan that you can’t afford
• Putting too much trust in an investment salesperson
• Trying out one investment and then another
• Not realizing that you are not living within your means
• Investing based on trends or hot tips as opposed to on long-term strategy

By recognizing your own mistakes in the past and admitting it, you will have a better chance to fix them and make smarter decision on your money in the future.

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