As we head into the second half of 2024, many people are feeling the sting of disposable income not being so disposable anymore. With an upcoming election and economic turmoil being a tough reality for many Americans, it isn’t surprising that 70% of United States citizens are facing money problems. Whether they are problems with the economic atmosphere or spending choices, the only way to change it is to turn the financial ship around.
More Going Out Than Coming In
It is basic math, but somehow, not always that basic. Many people live outside of their means. Those Americans who were just making it two years ago have had a hard time adjusting their outgoing expenses with incoming as the cost of living rises. When you spend more than you make, then you necessarily have to put things on credit cards, which only leads to more debt.
Not Tracking Payments
Many Americans don’t check their bank account statements. Many just swipe their cards and cross their fingers. When a monthly statement of accounts comes out, you must go over each transaction to make sure that you can account for them all. Often, there are small charges that people don’t know about or subscriptions and memberships that you don’t use. Every little bit counts when you find yourself in financial woes.
Not Having a Big Picture
Everyone should have a financial goal, whether that is month-to-month or retirement goals. People who take an approach to their finances that is hands-off typically spend more than they need to and have nothing to show for it. Setting realistic benchmarks for savings is the best way to ensure that you have the savings necessary to help you in a pinch.
Credit Card Dependence
According to statistics, 48% of Americans rely solely on credit to cover basic essentials. When you live off of credit cards, you are also paying a high-interest rate to use them. It quickly can become a situation where you are robbing Peter to pay Paul, and also one where you are just paying the minimum interest charges, not even touching the balance that you owe.
No Rainy Day Fund
Life is unpredictable, and if you don’t have a buffer when something bad happens, you can quickly find yourself in a scary position. Everyone should work toward having an emergency fund just in case something major happens. When your car breaks down, the refrigerator quits, or you have a hospital stay, you need to have money on reserve to handle what that can do to your already tight budget. Without a rainy day fund, your days can get stormy quickly.
Not Taking Advantage of Side Hustles
Most people have a free hour or two here and there. Instead of just sitting around watching television, you can make some extra money doing a side job or hustle. Thanks to apps that allow you to use your skills for freelance and contract work, earning a little extra to buffer the stress of not making enough will help to ease your money problems. Every little bit helps you to dig out of financial trouble.
Not Saving for Retirement
Although 401k plans are not the standard anymore for many employees, not putting money away early on can have a disastrous effect on your finances. Where once people could rely on Social Security, who knows what the state of it will be in a decade? Having a little taken off of the top before it gets into your hands will help you build a nest egg. It also will have little impact on your finances now but can significantly impact your overall financial health in the future.
Taking Calculated Risks
In your younger years, it is okay to be a bit riskier with your savings. Taking risks is sometimes a part of great rewards as long as you do it wisely. The best way to earn equity is to take on risky positions; just make sure to have someone in your corner who gives you the most sound advice possible.
Not Paying Down College Debt
Many people have college debt that they are not addressing, and it is accumulating. Deferring your student loan repayment might sound like a great idea at the time, but over time, that can have your interest charges balloon out of control. Even if your payment is minimal, try to at least pay little by little instead of just rolling it from one year to the next, avoiding the inevitable.
Paying Off the Wrong Debt
When you owe money, it is best to pay off the loans with the highest interest rates. But often, people get fixated on paying a larger amount and ignoring the ones that seem less significant. It is wise to sit down and figure out which debts are costing you the most and address them first.
Ignoring the Need for Excellent Credit
An excellent credit score can save you a lot over time. When you have a great credit rating, you can borrow money with lower interest rates. You also can invest in home buying and other big purchases. Make sure to pay attention to things like paying your bills on time, only using one credit card and not letting it revolve, and watching your credit score frequently to make sure that you are staying on track.
Buying Things They Don’t Need
There is a difference between things that you need and things that you want. Often, people will make big purchases that they want and ignore that they don’t actually need them. Impulse items that aren’t well thought through can hurt your financial outlook for a long time. Before making any large purchase, make sure that it is a need and not a want. Wants should only come when you have enough money to afford them without putting yourself into debt.
Spending Carelessly
What is a few dollars here and there? It is a whole lot when you add it all up. Apps like Uber Eats and Amazon are dangerous if you are clicking “buy it now” frequently and not paying attention. Careless spending can become a huge drain on your budget because it isn’t budgeted for. Avoid making quick and meaningless purchases that you aren’t accounting for.
Not Having Health Insurance
Health insurance is a necessary evil for many, but it is necessary. Even if you just have catastrophic health insurance, it is better than none. One major illness or injury can completely wipe out of your financial health as quickly as the illness does your physical health. Not protecting yourself with some type of coverage is a really poor decision.
Starting a Family Without a Plan
There is arguably never a perfect time to have a family, but there are also bad times to consider having a family. Babies cost money that you probably aren’t prepared for, and over a child’s lifetime, they just become more expensive. If you are going to start a family, at least make sure that you have a plan to cover the additional expenses that a family creates.
High Interest Rates and Home Ownership
For many, the American Dream includes home ownership. There are times when buying a home is a sound investment and others when it might not be. With interest rates high and inventory for homes low, now might not be the best time to buy. That doesn’t mean, however, that you can’t put money away for a downpayment on a home. If you have some money saved up, you can avoid PMI, and your payments will be lower, even if interest rates don’t rebound anytime soon.
Being Smart in the New Economy
Not many people plan to shop and look for discounts and coupons. At a time when every little bit helps, being thoughtful can be very helpful. Before you head out to the grocery store, look for daily specials so that you can stock up when things are cheap. Also, look for coupon codes online before you press buy. Lastly, consider ordering your groceries online and picking them up. When you buy just what you need, it will cut back on impulse spending, which can cost you a lot.
It Takes Planning to Make It Through Economic Uncertainty
The economy is unpredictable at best. With the cost of living on the rise and interest rates higher than we’ve seen in a decade, many Americans are finding themselves in a financial pinch. It takes planning to make it through economic uncertainty, but if you are proactive and watch your finances well, then you can weather this and many other financial storms.
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