6 money mistakes the experts make -- Page 2

Elizabeth Warren, author and Harvard Law School professor

4. Don't put all your eggs in one basket.
As a young wife and mother, Elizabeth Warren decided to get her law degree. "We had it budgeted to the penny," recalls Warren, who co-authored "All Your Worth: The Ultimate Lifetime Money Plan," with her daughter, Amelia Warren Tyagi.

To pay the tuition, the couple decided to use savings invested in stocks. "My husband's company gave us a discount for buying company stock," she says. For that reason, all of their stock, and a good portion of their savings, was invested in IBM.

Then "just before the tuition was due, the stock started dropping."

When she cashed out, there wasn't even enough to pay for a second semester. "I had to borrow and keep borrowing," says Warren.

"The summer after my second year in law school I had a job on Wall Street for three months. I literally took every paycheck to the bank and paid that loan," she says.

Simultaneously, the family slashed spending. For two years, "I didn't buy a single stitch of new clothing, not even socks," she says. "If it wasn't in my drawer, I didn't wear it."

Warren, now a professor at Harvard Law School, learned three valuable lessons. First, diversify your savings. "All of my stock investments are now in mutual funds," she says.

Second, if you are using stocks to pay for something specific, like tuition or a new home, "get out of the market well in advance of the time you'll need the money," she says. "I learned the lesson that you can't count on any price if you have to sell quickly in the stock market."

And third, don't invest the bulk of your savings in the company where you or your spouse works. "Post-Enron," she says, "we all know what a terrible idea that is."

Ric Edelman, author of "The Truth About Money."

5. Think ahead.
"When I quit my first job, right out of college, they asked me what I wanted to do with that retirement account," says financial adviser Ric Edelman, author of "The Truth About Money." "It was 800-and-some dollars," he says. "I told them cash it in and send me the check. That was obviously very foolish."

Twenty-three years later, "that money would be worth many thousands of dollars," he says. While he doesn't remember how he spent it, he does recall that taxes took more than half.

Edelman's advice to anyone in that same situation now: "Roll that money over into an IRA and invest it in a diversified stock fund."

Dave Ramsey, author of "The Total Money Makeover: A Proven Plan for Financial Fitness"

6. Never go for the fast buck.
In the 1980s, Dave Ramsey made a fortune buying and selling real estate. But his attitude got him into financial trouble and resulted in bankruptcy, he says.

"I was in get-rich-quick mode," Ramsey, author of "The Total Money Makeover: A Proven Plan for Financial Fitness," recalls. "What put me there? Immaturity, a touch of greed and a little arrogance."

When two of his financing banks were sold, the new owners called in the loans -- and that's when the "house of cards" collapsed, Ramsey says. He held off creditors for two years, sold everything and sliced what he owed from $3 million to $300,000. But he still ended up in bankruptcy.

But he also learned some important lessons. First, there's no such thing as a fast buck. His advice to others is what he learned and used to recover his own financial life: Play it smart, build slowly and focus on the long haul.

Almost equally important is to deep-six the dependence on credit. "I never borrow money under any circumstances," says Ramsey. "No car loan, no house loan, no credit cards." His reasoning: You are risking security and stability for instant gratification.

His favorite investments these days is paid-for real estate and mutual funds. "I would rather own 10 paid-for properties than 150 leveraged for cash," he says.

"No good food comes out of the microwave, it all comes out of the Crock-Pot," Ramsey says. "That's how wealth building works, and that's how success works."

Dana Dratch is a freelance writer based in Atlanta.