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Are You Compromising Your Financial Future?

financial-futureYou don’t need a crystal ball or a psychic to predict what the future holds for your finances. It’s easy to determine RIGHT NOW by evaluating how you handle responsibility and manage your day-to-day life. If you’re undisciplined, afraid of change or satisfied with the status quo, chances are you’re destined for disappointment. If, however, you can stick to a plan and are willing to make changes whenever it’s required or absolutely necessary, then you’re more inclined to be satisfied with your financial situation in the future.

No one intentionally chooses a life of worry, so why do so many Americans end up in
the deep end of the debt pool? You can blame the American dream and expectations of home ownership, new cars, fancy clothes, luxury vacations, etc., but the responsibility ultimately falls on you – the individual. According to the Federal Reserve, the average American household has more than $190,000 of debt, with nearly 8% of that being on credit cards. In fact, the average family carries $15,325 in credit card debt, with many struggling to pay just the minimum payments.

Money Management Magnified Over Time

Money practices, either liberal or conservative in nature, will be magnified over time resulting in a more secure financial future or one that is rife with worry about your ability to handle the next unexpected turn of events. By paying attention to how well you balance income and expenses and being open to align your budget with your current financial situation, you’ll start to set the stage for a secure future.

Here are the most common ways people compromise their financial security.

  1. Ignoring a Budget: Many Americans live paycheck to paycheck without a budget, making it nearly impossible to plan for the future. If you don’t follow a financial plan or manage a monthly budget, how can you expect financial security later in life? By following a monthly budget, you’ll be learning to live within your means and discover new ways to save for the future.
  2. Not Saving Enough: Americans are notorious for not saving. In fact, according to the U.S. Census Bureau, 36% of us aren’t putting away a dime for retirement and those that do are only saving an average 6% of their income. By comparison, German citizens put away nearly 16% for retirement. While it may be tough to jump into saving too quickly, slowly increasing the amount over time will make it easier to incorporate the change into your budget and lifestyle.
  3. Neglecting Opportunities to Invest: The biggest mistake many Americans make is to neglect investing in their employee retirement fund. These programs are well managed and simple to participate in with automatic deposits coming directly from your paycheck. Employers that match a percentage of your investment should never be ignored – it’s essentially free money. If your company has a program, become educated and get started today.
  4. Unlimited Credit Card Use: For a more financially secure future, credit card debt needs to be eliminated. Credit card purchases should never be included in a responsible budget and daily expenses should only be paid with cash or debit. If you must use a credit card, it’s important that you pay it off before the grace period is up, or at minimum, have a plan to pay it off quickly.

A Simple Idea to Keep Spending In-Line

Creating a budget is the first step to securing your financial future and there are lots of unique and creative ways to get started. Dave Ramsey is just one of many financial experts that suggests using an ‘envelope system.’ Label multiple envelopes with categories such as groceries, restaurants, gas and entertainment. At the beginning of each pay period place the amount of money allocated for each category in the appropriate envelope. As you use up the funds in each category, you’ll begin to use the money more frugally and with more thought. This system is a great way to help to eliminate spur of the moment purchases and lesson the temptation to use a credit card. Eventually, you can start focusing on saving and truly secure your future.

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