According to a recent study published in Science magazine, if you're poor and mismanage your money, you may be very capable of making good financial decisions. But you're trapped in a vicious circle: The inevitable problems that come with being poor are likely affecting your judgment, which means you're making bad decisions, which end up making you even more poor.
With that in mind, if you're financially struggling - or know someone who is - here are three ways people end up throwing money away when making common financial decisions: buying a house, buying a car and investing in a retirement plan. They're all generally good ideas, of course, but just because you're doing something smart doesn't mean you're doing it right.
Stretching to take out a mortgage. Few personal finance experts will say it's stupid to buy a house - but they will tell you that you can buy one too early in life, before you're financially ready. Many people also buy too big of a house.
"I can't tell you how many people I've seen get swept up in the romantic notion that they need to own a home or that they need to own a more expensive home, only to later regret it when they end up with a beautiful place but no money," says Scott Halliwell, a certified financial planner with USAA, a national financial services company based in San Antonio that mostly serves military members and their families.