It seems as though every time you pick up the paper, there is news of another financial crisis. (Or in today's case, a plan to fix a crisis.) The complex nature of our turbulent economy can leave consumers feeling powerless—perhaps bringing the nation’s problems to a more personal level.
A recent study out of Northwestern University shows that the more often we feel powerless, the more likely we are to spend beyond our means. The study may partially explain why Americans who are deeply in debt still spend more than they can afford. While I find this data to be very interesting, I wish the researchers had stolen a line from Dr. Phil and asked participants “how’s that working for you?”
While it is important for consumers to try and understand what is happening with our nation’s economy, it is imperative that consumers empower themselves to take good care of their personal economies. In addition to ignoring the urge to splurge, there are many ways consumers can take control of their finances.
-Deal with the big issues. If you have large, looming financial issues, such as unpaid debt or tax liens, it is time to deal with them head-on. Contact your creditors and make acceptable repayment arrangements. Implementing a plan to remove these stressors from your life will be good for your mental and financial health.
-Expect the unexpected. Now is a great time to start paying yourself first. Strive to establish an emergency savings account equal to at least three months of your income. If this goal seems too lofty, try having a small amount automatically deducted from your paycheck into a savings account.
-Do a credit check-up. A clean credit report equals better loan terms and more borrowing power. Experts recommend that you review your credit reports at least once each year and before making any major purchase. For your free annual reports, visit www.AnnualCreditReport.com.
-Plan for your future. Secure your financial future by participating in a qualified retirement plan, such as an employer-sponsored 401k. You can also contribute up to $3,000 each year into an Individual Retirement Account (IRA).
For those of you shy of long-term savings because of recent history, there is one thing to remember: there has been no 10-year period in the previous 50 years where the stock market has lost value. Individual stocks have failed, but overall the stock market has performed well for the long-term investor.