Personal Finances: Protecting Yourself from Yourself

Low unemployment, consumer-friendly interest rates, and strong economic growth apparently aren’t enough to save Americans from themselves.

Per the U.S. Census Bureau, the median household income in 2017 was $59,039, yet according to the Federal Reserve, American households with debt carried an average of $137,063.

While a considerable chunk of that debt is due to secured debt like mortgages, there’s plenty of bad debt floating around too. The average household that carried credit card debt had a balance of $16,883.

With the cost of living rising throughout the country and wages staying stagnant, how can Americans better protect themselves from, well, themselves?

Let’s look at a few painless money management strategies to incorporate into your financial life.

Money

Enrol in a Payroll Savings Program

For many Americans, developing a regular savings habit is an enigma. The sage financial advice to save six months of living expenses in an emergency fund to cover a job loss or unexpected financial hardship is falling on deaf ears. Less than one-third of Americans (29 per cent) have six months’ worth of living expenses saved, per CNBC. An astounding 55 million Americans have no emergency fund whatsoever!

How can we bring ourselves to save money when it feels all but impossible? Take the choice to save out of your hands. One way to do this is with a payroll savings program. Government programs like TreasuryDirect automatically deduct money from each paycheck and deposit it into a Certificate of Indebtedness (C of I), which you can use to purchase treasury securities like bills, notes, and bonds.

Even if you don’t enrol in a payroll savings program, consider automatically deducting a portion of your paycheck to a separate account. Without the money being taken out of your account for you, you’ll always have to make the choice to save. Why leave something so important up to chance?

Track Spending with Mobile Apps

Finance

A plethora of personal finance apps exist to make you a better money manager, but with routine listicles proclaiming dozens of must-download apps, it’s easy to get overwhelmed and do nothing. To get a handle on how you spend your money, a mobile app like Wally makes it easy to track daily expenses. Wally tracks the essential details of your purchases, like where, when, what, why and how much. Link your bank accounts for your purchases to automatically be tracked or get more accurate results by taking a picture of your receipt and uploading it to the app. Either way, be prepared to know exactly how much you spend on turkey sandwiches each month.

Seek a Company’s Expertise, But Vet Them Like You Would a Nanny

Finance

Sometimes we have to take a few steps back to get ahead in the future. Seeking debt assistance is one of these scenarios. The thought of debt settlement or declaring bankruptcy might seem like a severe move, but depending on your level of indebtedness, might be your chance to pave a new path toward financial wellness.

Check out sites like ConsumerAffairs to get a sense of how many people have used the company’s service recently, the company’s overall rating and what the debtor’s experience was like. A quick look at Freedom Debt Relief reviews shows over 3,000 people have reviewed the service in the last year alone, and on the first page, we get a few recommendations for employees who provided excellent service.

Of course, ratings and review sites won’t tell the whole story, which is why you should talk to each company on the phone, or in person if they’re local. Be sure to pay attention to the company’s interest in educating you versus selling you a product. And given the non-negotiable nature of the internet and commerce, you’ll want to make sure their site offers in-depth information and resources. Any website that looks thin or strictly suited to sell you something probably doesn’t have your best interests in mind.

Build a Reasonable Budget

Finance

You’ve likely tried to budget a few times in your life, but for some reason, the practice hasn’t stuck. Did you make your budget too granular in the past? Were you not able to exercise discipline, so you got discouraged and quit? Whatever the case, this time is going to be different.

Why? Because you’re going to be realistic. You’re going to set disciplined spending limits, but you’re not going to go overboard and relapse as a result. Like a successful diet, aim for progress and not stopping things cold turkey. Instead of only focusing on small, fleeting purchases, also determine how you can trim expenses in your big three: housing, food, and transportation. Even a minor adjustment to the areas that make up the bulk of your spending can have a big monthly difference.

Stay Mindful of Your Problem Areas

Finance

As you track expenses and monitor how you fare in your new budget, the problem behaviours will be glaring. You might have thought you had a problem with sneakers, but turns out that it’s 15 per cent of your monthly spending. Or maybe you’ve always been one to value your time over money, so you eat most meals out — except seeing your grocery bill rival your rent brings a hard gulp. It’s not easy knowing where your money’s been going, but it’s necessary to correct course.

Money doesn’t make us happier, but it can definitely help us avoid a slew of painful emotions. While it helps to earn more money, the number one thing holding people back is themselves. By making a plan to curb your spending and get out of debt, you’re committing yourself to a better future.

If you loved this post then you might also like Erin’s post on how to take control of your money.

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