How NOT to Spend your Money

When it comes to managing money, no one wants to make dumb mistakes. Here are five seemingly smart moves that actually backfire.

1. Contributing the minimum to your 401(k). Skimping on your 401(k) contribution can cost you big time. Simply upping your annual contribution by $1,000 for the next 30 years means you'll have $153,110 more for retirement than you would otherwise. (That's assuming a 7-percent return and a 50-percent employer match.)
2. Having lots of credit cards. Credit cards may give you peace of mind, but having more than two can damage your credit score and increase your temptation to spend. Plus, big credit card balances mean less money available to sock away in your 401(k).
3. Getting a big tax refund. It's nice to get that refund check at the end of the year, but why give Uncle Sam free use of your money? The smart move is to adjust your withholding so you can keep more cash each month. Contribute your savings to your 401(k) to reduce your taxable income even further.
4. Cashing out your 401(k). When you leave a job, it's tempting to take your 401(k) money and run. But don't. This dumb move means you'll pay a 10-percent penalty on the value of your account plus additional income taxes. Cashing out your 401(k) is like throwing your potential for tax-free growth out the window.
5. Saving for college. You want your kids to go to college, but not at the expense of your own retirement plans. The better alternative is to fully fund your 401(k). Your kids can always take out low-interest loans for college. But no one is going to loan you money for retirement.

Sources: Money magazine's "50 Smartest Things to Do With Your Money" and "15 Dumb Moves" from money.cnn.com