If you find yourself facing a mountain of debt and wonder if you can ever pay it off, don’t think you are all alone in the world. The fact is that most of us make decisions that adversely affect our financial well-being. Those poor decisions aren’t necessarily major ones that have to do with buying the wrong stocks or consciously deciding to make some sort of major deal that ultimately undermines our finances. More often than not, it’s the little things that tend to get us in trouble. Here are some examples.
Savings Accounts
Most people have very good intentions when it comes to saving money. We have every intention of opening a savings account and making regular contributions. Certainly, most of us know we should save money out of each paycheck and deposit that money in an interest bearing account. The problem is that we never seem to get around to it.
More often than not, what happens is we allow other matters to claim the money that we intended to place into savings. Perhaps the car needs repairs or there’s a great sale and we can buy some things we want and save money on the clothing budget. Before long, a whole year has passed and we haven’t saved a dime.
The problem is that once we have the money in hand, it’s much easier to spend it than save it. One solution is to set up an automatic deposit with your employer. Have a fixed amount deducted from your net pay and deposited directly into your savings account. From there, forget the money exists. If you learn to live without those few dollars each payday, it will be easier to amass a decent amount of savings over the years.
Budgeting
Budgeting is another area in which we tend to become a little casual. The fact is that households only have so much money coming in each month and there is a need to allocate funds to cover all basic expenses. Without a reasonable budget, it’s very easy to overspend and not have enough to get to the end of the month.
Our forebears understood a very basic financial truth that was often expressed in terms that amused us as kid. When your outgo exceeds your income, your upkeep becomes your downfall. Basically put, living beyond your means will ultimately catch up with you and it won’t be pretty.
One of the best ways to maintain control of your spending is to set up a budget and stick to it no matter what. A workable budget allocates sufficient funds to take care of basic living needs like food, clothing and shelter. When there is money left over, a portion of that can be earmarked for things you want and that will provide some sort of ongoing benefit. All other expenditures come in after needs and justifiable wants have been met.
If you are not sure how to craft this type of budget, seek the help of a professional. Consider the cost of working with the professional as an investment in your future financial security. You may be surprised at how much easier it is track and qualify spending when you have a viable plan.
Saying No
It’s very easy to rationalize using credit cards to buy something you really don’t need. The item was on sale and you save money by making the purchase. Before long, you have rationalized enough purchases that you are near the card limit. When you factor in the interest that you pay while chipping away at the balance, those purchases weren’t such bargains at all.
Rather than use your cards to buy things you don’t need or will not want after a few days, only use them for essential purchases. See them as a way to buy groceries at the first of the month and enjoy the cash back bonus that the provider offers with the account. Before the next statement arrives, pay off the balance of the card. Doing so means no interest rates assessed and you actually earned a small amount for your efforts.
The bottom line is that buying items you don’t need or that will lose their appeal in a day or two is not in your best interests, even if the item is on sale at half the price. Learn to say no, let it pass and realize your life is not going to be awful without the item. As time goes on and you have fewer debts to manage, you’ll be happy that you chose to hold your ground and not give in to temptation.
