7 surefire ways to stay poor

Here's the drill: Our needs are few, and they include shelter, food, clothes, transportation and companionship. Our wants are endless and quickly will transform a need like clothing (which can be Goodwill finds or hand-me-downs) into an extravagance such as a new suit.

Figuring out what we really need, and how to get it for less, can help get our finances under control. If you find yourself saying, "I need a (whatever)," stop a moment and consider whether you really do. You probably don't have to live without it forever -- just long enough to truly get on your feet. (See "The difference between 'want' and 'need'? 3 months" on MSN Money's Smart Spending blog.)

Considering only the monthly payments. Whole businesses thrive on getting you to ignore the total cost of your purchase. Payday lenders, rent-to-own shops and car dealerships want you to focus on the short-term payments, not the long-term expense. Avoid the first two.

Anytime you consider a loan, bring a calculator so you can multiply payments by the number of months you'll be on the hook to get the real cost of what you're buying. (See "Keep you old clunker or buy a new car?")

Failing to track where the money goes. If you're broke, you need to find out where every nickel is being spent so you can make intelligent decisions about how to trim. J.D. Roth, the blogger for "Get Rich Slowly" and who dug his way out of $35,000 in debt, says getting a handle on his spending helped him turn around his finances. Technology makes that easier than ever before: You can use personal-finance software such as Money or Quicken, or sign up for an online solution like Mint, Wesabe, Yodlee or Quicken Online.

Carrying credit card debt. You probably didn't mean to do it. You just ran into a jam one month and couldn't pay your whole bill, and somehow it has snowballed from there. But carrying credit card debt costs you a fortune and puts you at the mercy of credit card companies.

If you can't pay your bill in full, stop using credit. Pay far more than the minimum, and come up with a plan for paying it off entirely before you pick up the cards again. (See "Your 5-minute guide to managing debt.")

Living close to the edge. Every setback is a crisis when you have no cushion. Failing to have any savings also increases the chances you'll bounce checks, incurring expensive fees, and pay bills late, trashing your credit scores -- those all-important numbers that determine how much you pay for loans, insurance and housing. (For more, visit MSN Money's Decision Center on credit scoring and read "Don't be duped by bounced-check 'protection.'")

Even a few hundred bucks can make a difference, so read "Why you need $500 in the bank" for details on building a financial pad.

Squandering what you have. Most workers contribute to some kind of retirement fund, typically a 401(k) account that they can take to their next job or roll over into an individual retirement account.

But nearly half cash out when they leave a company. That's nuts. You lose a fortune in taxes and penalties -- and worse, you lose an even bigger fortune because the money isn't there to grow and support you in retirement. People who raid their retirement funds won't just be broke now. Later, they'll be old and broke, a pretty awful combination. (See "Retirement for the not-so-rich.")

Liz Pulliam Weston's latest book, "Easy Money: How to Simplify Your Finances and Get What You Want Out of Life," is now available. Columns by Weston, the Web's most-read personal-finance writer and winner of the 2007 Clarion Award for online journalism, appear every Monday and Thursday, exclusively on MSN Money. She also answers reader questions on the Your Money message board.

Published July 14, 2008

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