by Anna Davies
Rex USA/Getty Images Here's an eye-opener from financial literacy adviser Clare Levison, C.P.A.: "I see so many smart, successful young women making the same cash-flow mistakes and just assuming it'll all work out financially." Truth is, those bad habits cost us a lot--in one recent survey, a whopping 60 percent of women admitted to carrying a credit card balance. We can do better, ladies! For starters, beware these all-too-common pitfalls:
What it is: As your income rises--even a little bit--"lifestyle creep kicks in," says Manisha Thakor, a financial adviser and coauthor of Get Financially Naked. "Even luxuries like an expensive workout class become your new 'necessities,'" a real issue in certain cities like San Francisco or New York, where the cost of living is higher already.
What to do: It's fine to upgrade your lifestyle when you get a raise--within reason, says Levison. "Put 80 percent of any salary bump into savings," she says. "The rest is fun money; blow it all at once or spread it out." If you don't have a budget, make one and stick to it: Spend 50 percent of your take-home pay on necessities like rent, 30 percent on extras like entertainment and shopping, and 20 percent on savings and paying off any debt, suggests Thakor.
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What it is: Americans ages 18 to 29 spend more on food than any other age group--$173 per week--and they eat out more; thirty- and fortysomethings spend almost as much. And women want to dine out 10 percent more often than men. "We justify restaurant dinners as a way to catch up with friends, and we're more likely to order a second bottle of wine even if we're strapped," says Carrie Smith of finance blog carefulcents.com.
What to do: "Aim to spend no more than 15 percent of your take-home on food," says Smith. Earn $50,000 a year? That's about $110 per week.
What it is: "We've been trained to assume that auto-pay for recurring charges is efficient," says Thakor. "But you can lose a fortune on services you never use." Match.com, for example, costs some of its users as much as $240 a year.
What to do: Highlight every automatic payment in your last credit card statement, Thakor suggests, and look for overlap--do you need Spotify ($120 a year) and SiriusXM ($159)? If you got HBO just to watch Girls, say, you could scrap your subscription until next season and save an average of $117 a year.
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THE HELP-A-FRIEND EFFECT
What it is: You cover your broke BFF's latte or plunk down $20 extra to avoid check-splitting awkwardness. "It's natural to want to treat your friends," says Deborah Small, Ph.D., marketing and psychology professor at the Wharton business school. "But often we don't realize how much we're doing it."
What to do: Remember, your finances come first. "When money is tight, even a few dollars can throw you off track," says Dave Ramsey, financial author and radio-show host. Meeting a cash-poor friend? Anna Newell Jones--a personal finance expert who went on a yearlong "spending fast" to pay off a $23,605 debt--perfected a strategy: "I'd meet up with people at free concerts or plan DIY spa days," she says. "Once I talked about it, I found a lot of my friends had spending issues too. Being honest helped us work through it together--no shame."
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by Anna Davies