Feeling powerless can lead to spending

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.

Kim McGrigg is the former Manager of Community and Media Relations for MMI.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.
  • The National Council of Higher Education Resources (NCHER) is the nation’s oldest and largest higher education finance trade association. NCHER’s membership includes state, nonprofit, and for-profit higher education service organizations, including lenders, servicers, guaranty agencies, collection agencies, financial literacy providers, and schools, interested and involved in increasing college access and success. It assists its members in shaping policies governing federal and private student loan and state grant programs on behalf of students, parents, borrowers, and families.

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  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.