March 27th, 2017 5:08 AM by Jackie A. Graves, President
Just about one-third of Americans say their financial life is
worse than they thought it would be.
That’s the primary conclusion of a new study by the National
Endowment for Financial Education (NEFE) — that the cause of their financial
stress is something as simple as ongoing transportation expenses, housing
repairs or maintenance, or even paying medical bills reveals why so many
Americans feel the economic recovery has left them behind.
“We have to stop looking at unexpected events as not if they
will happen, but when they will happen,” says Paul Golden, NEFE’s executive
Indeed, it’s the small drip-dropping of unexpected expenses that
often leads to a financial life unraveling. And that puts buying a home out of
reach for many.
In today’s much stricter lending environment, measuring one’s
ability to repay a loan has become formulaic. To be approved for a mortgage,
you have to show you have enough income to make the monthly payments of
principal and interest, real estate taxes and insurance, and enough savings in
reserve. That’s a pretty high bar.
For most of us, the good news is that turning your financial
life around doesn’t require much more than a good dose of discipline. Spending
less than you make, putting off unnecessary expenses, and saving the rest is
the recipe for financial success.
Reverse engineer your savings process. How much do you want
to save this year? Is it $1,000, $10,000 or some other number? Whatever the
amount, write it down, and then reverse engineer the process of saving to that
specific number. In other words, if you want to save $1,000 by the end of the year,
you’ll need to save $2.74 each day to get there. If you want to save $10,000 by
the end of the year, you’ll need to save $27.40 per day. Understanding how
numbers work is the first step to achieving your financial goals.
saving your top priority. If your mouth waters every
time you walk by a slice of chocolate cake, you may find saving money
difficult to do. That’s natural, but it doesn’t mean you can’t. It means you
haven’t made the tough choices to make it possible. So, make saving your top
priority in 2017. Learn the art of “deferred gratification,” which may mean
saying no to yourself and your children. (If you have children, engage them in
the choices you have to make so that they understand why they can’t have a new
toy or go to a local restaurant.) Try to find ways to save everywhere. On one
of Ilyce’s radio shows, a listener told her that she still goes to restaurants
with her family, but no one gets a drink other than water: no alcohol, no
sodas. Doing that shaves about one-third of her bill, and helps her save more
than a thousand dollars every year.
it day by day. Big numbers are hard. But saving $2 or $3 per day sounds
doable. The big question for most people is the “how.” One of the most
successful strategies Ilyce has employed over the years is using cash over
credit or debit cards, and then “saving her change.” At the beginning of the
week, figure out how much cash you need for the bare minimum of purchases,
including food and transportation to your job. Put that cash in an envelope and
use it for the week. At the end of the day, take whatever change you have in
your pocket and put it in a jar. Then, the next day, break a new bill. At the
end of the week, you’ll probably have a few bucks in your change jar. The
second week, remove your change and your lowest denomination bill from your
pocket, like a $1 bill. The next week, take change and two $1 bills. Over time,
you’ll get used to spending less because you’ll have less in your wallet.
And, remember this: Whether you hit your goal exactly by the end
of the year is largely irrelevant. What you’re trying to is build a foundation
of financial stability, with good money habits, that will last you a lifetime.
By Ilyce Glink - To view the original
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