According to the Federal Reserve, the average household carries about $7,149 of debt. However, that takes into account those who carry no debt. So if you look at the 39% of Americans that carry debt month to month on credit cards, the average debt jumps to over $15,000. A huge chunk of us have spent at least some time on the debt side of that equation. Want to make a change? Here are healthy habits you can start today that will put you back in control.
Look to the future
We are bombarded with thousands of ads a day telling us we could be happier, smarter, richer, cooler, sexier, and an all around better person if we just buy this or that. And, you better hurry because this is the biggest sale of the year and if you don’t act now…you will miss out! There is something exciting about feeling like you got something you “need” for a good deal! Just take a moment, step back, and focus on your future and your goals. When you are making financial decisions make sure that what you are doing keeps you on your path to success.
I know you have heard it a million times, but it’s for a good reason…establishing and maintaining savings is your number one defense against a dependence on credit cards. According to bankrate.com, only 1 in 4 Americans have adequate savings to cover 6 months of expenses. I am sure we would all want to have that nest egg, but for some it’s not that simple. With wages at a stand-still and increased expenses, savings can be a challenge. It is not easy and it won’t happen overnight, but you have to start somewhere. So why not start today?
Both periodic and emergency savings play a role in financial stability; so make sure you are giving some attention to both. Emergency savings are for when personal financial chaos happens (job loss, injury, illness, etc). This is what you would need to cover basic expenses for 3 to 6 months should you experience a loss of income. If you can eat it, wear it, or drink it…it’s not an emergency. Periodic savings are for the expenses you know are coming, but you may or may not know when or how much (car repair, appliance replacement, property taxes, etc.)
With your savings established, life’s surprises will have a much harder time catching you off guard. Here’s a hint: Keep your emergency and periodic savings in a different bank or credit union that you have your checking account. It will help you to avoid the temptation to dip into savings.
Be your own credit card
A lot of credit comes from the idea of buying now and over time with monthly payments that are easier to handle, as opposed to a big chunk for whatever a larger ticket item may be. When they toss in the 0% interest for a certain number of months…that is almost a deal you can’t refuse. However, if you are okay with making monthly payments towards something, then make them to yourself and set the money aside for the item that you want. Use the time that it takes collect the funds needed to do your research, compare products, and shop for deals. You will end up with the best buy for your money and you will never be charged fees or interest causing you to pay more. Bonus: you often get a discount on big ticket items when paying in cash, saving you additional money. Or, if you have perks on a credit card that you would like to use, you can buy the item on the card and immediately pay off the balance in full with the money you saved. That way, you reap the benefits at no additional cost.
Just because you can doesn’t mean you should
Living below your means comes with a tremendous amount of freedom. Getting tied down with the largest mortgage and/or car payment you can be “approved” for can be financially paralyzing. Then you add in the additional costs of home (utilities, taxes, insurance, and maintenance) and car (insurance, registration, gas, and repairs) ownership and you are now over budget. With no wiggle room you may find yourself being forced into more debt. Finances are the number one cause of stress. So do yourself a favor and keep your financial obligations manageable.
Keep at it
Like any healthy lifestyle change, you have good days and bad…but the important thing is that you keep your goals in sight and don’t give up. If you get off track, tomorrow is a new day.
Need to pay off some debt to get you closer to financial stability? Check out Mary Mckeague’s blog post, “3 steps to stop running in circles and start paying off debt.”
If you want additional tips or advice to more quickly gain control of your finances and conquer your debt, call LSS at 888.577.2227. Our Financial Counselors are available to help you achieve your financial goals. So don’t wait – take action today!
Author Ashley Hagelin is a Certified Financial Counselor with LSS Financial Counseling and she specializes in Reverse Mortgage Counseling.