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Money Mistake #1: You Used Your Debit Card to Pay for Gas, an Appliance, a Rental Car, Reserve a Hotel Room or Anything Online

Buy a coffee at Starbucks with a debit card and $2.01 will be deducted from your checking account—end of story. But fill up your car for $30 and the gas station might put an $80 "hold" on your checking account for a couple of days until the station reconciles its accounts and transmits your purchase to the bank. While that money is locked up, you can get hit with overdraft charges for subsequent purchases—even if you have enough money in your account.

The worst move is to check in to a hotel with a debit card but pay the bill with a different card. The debit-card company might keep the hold for as long as 15 days, unaware that you paid with another card. Spend four nights in $250 hotel room, and, when the phantom incidentals are added in (a hotel might tack on an estimate for anticipated minibar or room service charges to the "hold"), you could lose access to $1,100 of your own money for half the month.

Solution: Use a credit card—which also comes with protections such as extended warranties, travel insurance and the ability to withhold payment if you don't get what you paid for. Just remember: As found in an experiment at MIT, people using credit seem to be willing to pay far more than they would if they use cash. If you're already carrying a balance, you may be paying the equivalent of an overdraft fee every month in interest charges. In that case, your best bet is to cut up the cards and stick to debit until you've paid off your entire balance.

Money Mistake #2: After a Financial Crash, You Transferred Your Savings to "Safe" Investments

There are three kinds of risk: market risk, inflation risk and emotional risk—and every investment is subject to at least one of them. In the past few years, most people have come to understand market risk. Inflation risk involves the purchasing power of a dollar as it shrinks over time. For example, in 1971, you could get a Cadillac for around $7,000; today an Escalade goes for $45,000. Emotional risk may be the most devastating, and it's the hardest to control. You're probably sick of hearing investment experts like me tell you not to panic when the market hits a rough patch, but here's why we feel so strongly.

The stock market started to get really scary around October 2008: The Dow fell nearly 700 points in just one day. No wonder investors dumped $31 billion in stock funds over the next five months, right before the market bottomed. How'd that work out for investors who panicked? According to an analysis by Vanguard for this article, if everyone had put that money in cash—savings accounts and money markets—it would be worth $31.1 billion as of March 2012. If all those investors had put it in bonds, it would have done a little better—growing to $38 billion. Had it just remained in the market? It would have grown to $63 billion. So if you sold your stock funds in the teeth of the financial crisis and locked in your losses, your account hasn't grown (in fact, you may have lost purchasing power, thanks to inflation). If you stuck it out, you doubled your money.

Solution: You've heard it before: You need stocks to ensure a well-funded retirement. One option for nervous investors is to use a target-date fund, which will automatically reduce (market) risk as you get closer to retirement. Vanguard found that target-date fund investors were less likely to sell in the bear market than those who owned pure stock funds. And women, according to Vanguard, were 10 percent less likely to sell than men, which jibes with other studies that have found that women trade less and therefore perform better.

Next: Creating a budget for pampering yourself


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