This year may shape up to be the Year of the Personal Budget.
Each week, Consolidated Credit searches for unreported financial research that can help you deal with your debt and budget. This week…
The interesting study
The Country Financial Security Index by financial service provider COUNTRY Financial has been released at the start of each year since 2007. It measures how Americans are feeling about their finances in the New Year and how they plan to manage money throughout the year.
The big result
According to the survey, most Americans are starting the year with their finances headed in the right direction. Of the people who set financial goals last year in 2014, 80 percent achieved at least some of them and almost one in four (24 percent) achieved all of them.
However, the banner statistic in this survey comes in the fact that 70 percent of Americans plan on setting a budget and sticking to it in 2015. Even 54 percent of people who didn’t have any focus on finance last year, plan on budgeting diligently this year –and that’s good news.
The fascinating details
This positive financial action continues to show up in the rest of the survey, too…
- Of those who set goals last year and accomplished at least all or some of them, 80% say they will take similar action this year, including sticking to a budget.
- Of those with debt, 30% say that they will be debt-free by the end of this year.
- 49% of Americans plan on making long-term savings contributions for retirement.
- 58% of Americans will make charitable donations, but that’s actually down from previous years; for instance, 83% of Americans donated in 2013.
“In 2015, many are highly focused on shorter-term goals like saving money and paying down debt. However, it’s important not to lose sight of the long-term challenges, and no annual financial plan is complete without resolutions to work toward those longer-term goals like retirement,”says Troy Frerichs, director of wealth management at COUNTRY Financial.
What you can do
One of the great things about maintaining a budget is that it allows you to maintain the right financial balance. In an ideal world for your finances, you’d have a balanced mix of different financial needs –so instead of all of your money going to one goal like paying down debt, you spread the love a little. You use some of your budget to pay off debt, some to contribute to short-term savings and some to contribute to long-term savings.
That doesn’t mean that you have to keep everything exactly equal, but you should have at least some balance.
For instance, let’s say after all of your regular bills and expenses are paid each month, you see that you have about $1,000 left over in free cash flow (money that’s not designated for a particular expense). You have credit card debt that you want to focus on paying off, but you also don’t want to ignore your savings.
In this case, you might decide to devote 60 percent of that money ($600) to making extra payments on your credit cards so you can reduce your debt quickly. Then with the leftover $400, you can put $300 into a short-term savings account, while the leftover $100 gets designated for an IRA contribution for your retirement. This is an example of having balance in your financial world.
In the above example, once you finish paying off all of your credit card debt, you may decide to switch things up. You might take $300 to make a bigger payment on something like an auto loan. Then you put a full $500 in short-term savings and increase your IRA contribution to $200.
If you have questions about making your budget work and balancing your financial needs and wants, we can help. We can also help you get on track if too much credit card debt is holding you back for achieving your goals. Call us at or complete a request for a Free Debt & Budget Analysis.