The five biggest money mistakes you can make

You probably don't realise it, but if you're doing any one of these five things, then your finances are in jeopardy.

In these straitened times, many of us are inevitably struggling to make ends meet.

But startling news last week from the housing charity Shelter, that more than a million people had put their mortgage or rent payments on to their credit cards in 2009, highlighted the desperate measures that so many families are being forced to take to cope with the downturn.

As any financial adviser or debt expert will tell you, the number one priority when it comes to paying your bills is the roof over your head. So it's quite understandable that those who simply do not have the cash to pay their mortgage lender or landlord are resorting to plastic, when the alternative is repossession or eviction.

Paying off your mortgage with your credit card

What is so bad about paying off your mortgage with a credit card?

Well, first of all, it means you'll be paying more interest - perhaps not straight away, but in the long term almost certainly.

Most home loans charge between 3% and 6% annual interest. Most credit cards charge at least 15%, and some charge more than 30%.

If possible, you would be far better off taking a payment holiday from your mortgage, and allowing interest to build up - after all, it is cheaper than most other forms of borrowing.

Ultimately, though, the fact that people have to resort to paying off mortgages with credit cards is a clear indication that they have serious money trouble.

It demonstrates that you cannot meet your most essential monthly bill, and also that things are only going to get worse, as the interest on your debt spirals out of control.

But even if you're not putting your mortgage on your credit card, you may still have a serious debt problem. Here are lovemoney.com's top five warning signs that a personal financial crisis just might be around the corner...

1. You end every month in the red

One of the most common signs that you're living beyond your means is finding yourself overdrawn whenever payday approaches.

At this time of year, when you're feeling the after-effects of Christmas and New Year spending, it can be very difficult to avoid using an overdraft.

But if that is the case every month, it is a clear sign you are spending too much.

Not to mention the fact that overdrafts - especially if they are unauthorised - are one of the more expensive forms of borrowing.

Draw up a budget, and work out how you can either cut out unnecessary purchases, or generate more income. Adopt our goal on how to manage on a small budget, for more help.

2. You don't know how much you owe

With credit cards, it is easy - and dangerous - to ignore how much debt you're in.

It is easy because credit card lenders allow us to just pay off a fraction of our borrowings every month, usually around 2% or 3%.

And it's dangerous because, by making the minimum monthly repayment, you are allowing interest costs - in the region of 15% to 20% - to build and build.

But a shock could be in store if your lender decides to cut your credit limit - an increasingly common occurrence these days - or asks you to pay more than the minimum every month.

Round up those unopened statements and work out today how much you owe in total. Then ask yourself how you are going to go about getting back in the black.  Adopt this goal for a step-by-step guide to paying off credit card debts.

3. You don't have a rainy-day fund

Living within your means is a good start - but it is better still if you have some spare cash squirreled away just in case.

Debt experts say that each of us should have a rainy-day savings fund equivalent to three months' earnings after tax tucked away to help cope with being made redundant, for example.

Make sure the money is in an instant-access account, earning a decent rate in interest - the best pay over 3%.

If you don't have a buffer yet, why not try and set one up in 2010? If you can put aside a quarter of what you take home every month, you'll have a pot equal to three months' net earnings by the end of the year.

Adopt this goal for more help on how to Build up your savings

4. Your income is not protected

Thinking about redundancy or being too ill to work is not much fun, so it's no surprise that few of us do it.

But if you have a family who depend on your earnings for housing and living costs, you have a duty to make sure your income doesn't dry up if something bad happens.

That's why it's worth looking at insurance to protect your salary. Income protection policies allow you to choose how much you will get if you can't work, and for how long - the higher these two figures are, the more expensive the premiums.

Another type of policy, known as payment protection insurance, can ensure you keep up repayments on a loan or mortgage, but will not ensure you have enough cash for living expenses. Avoid it at all costs - it's a rip-off.

5. You don't have a pension

OK, this is more of a long-term issue. But your older self will be grateful if you can start saving for retirement as early as possible.

Even if you can't make hefty payments into a pension right away, any money you do put in will have longer to grow if you start young.

And bear in mind that relying on any property you own to fund your old age is not guaranteed to work out.

If the housing market is in the doldrums when you need the cash, you could end up a lot worse off than you'd expected.

Read how to pick your first pension for help take your first steps towards pension saving.

And remember, if you are worried about your finances, you're not alone. Why not hop over to Q&A and ask other lovemoney.com members if they can help? Or check out our new blog on Dealing with Debt, written by the debt charity CCCS.