Next year will be a time of new beginnings for many Americans who have vowed to improve their finances, build their savings and eliminate their debt. As consumers assess their existing conditions, many are also looking back on the most common obstacles that held them back in 2012 and hindered their financial progress. For those who trying to move forward, recognizing pervasive and damaging attitudes about money might help individuals avoid making mistakes.
It’s common for adults to have a full financial plate that includes a mixture of savings, management and debt repayment goals. Although a balanced budget plan can help them accomplish a variety of goals over time, many feel they cannot save money or pay down their debt due to other obligations. For example, many people who are focused on paying down debt will prioritize this goal and disregard their savings. Others may say that they don’t make enough money to put a portion of their income away.
To avoid these types of attitudes, consumers should develop a budgeting plan that accounts for savings and debt repayment goals, regardless of their income. Saving a great deal of money does not have to be done all at once, and as long as consumers are putting some money away each month, they are improving their positions. Consumers should consider setting up a separate account and having a percentage of their income automatically deposited each pay period. Automation can help workers avoid the temptation of spending the funds before they have put money into savings.
Wishful thinking without action can be a recipe for financial disaster
Another common error people make when trying to improve their finances is waiting for a cash windfall or other money fantasy to come true. For example, people may wait to pay down their debt or build an emergency savings fund in anticipation of receiving a work bonus or refund on their taxes. In the interim, they may continue making poor financial decisions, such as racking up debt, until they receive their windfall. Bonuses, refunds, lottery winnings and other cash influxes are not guaranteed, and building finances around these possibilities hinders individuals’ abilities to make real changes to their finances.
Starting off the new year right by taking an honest assessment of their finances and mapping out real solutions can help adults get on the right track. For those who are unsure where to begin, meeting with a credit counselor can be a good first step to take toward financial independence.