How to Go Broke….. Fast!
Living for the moment and is not good for your long-term finances.
Americans are doing a good job of placing themselves on the path to broke. A recent survey conducted by SunTrust Banks reported that one third of households that have an income of $75,000 or more actually live paycheck to paycheck. Additionally, the average household is $16,000 in debt on credit cards with little savings.
How or why is this the case? Well, poor decision-making is one reason. Generally, deciding whether something is truly a want or need is not a process that most people go through when making purchases. Purchases are sometimes made emotionally and quickly without thorough planning. The mindset that you can have whatever you want contributes to an unhealthy financial situation.
Being aware of what’s causing financial struggles is a good start toward changing the course of your future. Here are several decisions that will keep in a cycle that leaves you with less than enough money.
1) Stress. When people are stressed about not having enough money, poor decisions are made. Being stressed about money actually means you’re more likely to use credit cards carelessly, creating more stress.
2) Make minimum payments. Today, credit cards are charging over 20 percent interest, which means paying off your debt could take you not years but decades if you’re making just the minimum payments. Work out a plan to pay more than the minimum per month and pay of credit card debt as soon as possible.
3) Maintain expensive habits. If your daily purchases include cigarettes, custom coffee drinks or two meals out, these expenses add up to thousands per year that could be in your savings account or invested for long-term growth instead.
4) Stay in a mediocre job. If you could be making more money, then you really should. If you need additional skills in order to make a jump, there are single certification courses and other ways to obtain credentials. Complacency is not going to help you financially.
5) Buy a house that is too large. If you buy a house that is larger than you need, you’ll pay more for a mortgage, taxes, utilities and maintenance. Buying a modest house means you’re less likely to rely on your credit cards for other expenses, and will have more for those purchases that fall under wants category.
6) Ignore debts. If only it were so easy to forget about large debts and have them go away. Not truly facing your financial situation avoids tackling the problem and makes it increasingly worse over time.
7) Expect someone to bail you out. It isn’t the responsibility of the government to help you out of debt, nor is it the job of family and friends. Bankruptcy cripples you financially for a decade. Plus the odds of winning the lottery are definitely not in anyone’s favor.
8) Fail to consult a financial professional. Financial professionals aren’t only for those who have lots of cash. A financial professional can help develop a plan to help you reach financial security and peace of mind. At the very least, become educated about your financial health.
People are living longer these days, which increases the risk that money will run out. Ideally, you should financially plan to live until age 90 or more. The common rule has always been to have enough saved so that 4 percent could be taken out every retirement year easily. But lately, studies show that more money is needed to live comfortably in retirement. These facts, combined with the unknown about the future of Social Security, make financial planning a must for everyone.
The first step toward living healthy financially is recognizing what behavior or circumstances are contributing to money issues. There are small changes that can be made to shift away from living paycheck to paycheck and toward living confidently about your future. If you wouldn’t diagnose your own health problems and conduct your own health procedures, then you shouldn’t expect that professional help is not needed when it comes to your finances.
Bayntree Wealth Advisors dedicates substantial time to ensuring clients have holistic plans that include building financial health and wealth. To discuss questions about retirement planning, contact the team at questions@bayntree.com or 480-494-2750.
Bayntree Wealth Advisors, located in Phoenix and Scottsdale, Arizona, provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.
Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.
