Profit Five Years from Now for Your Work Today

Profit Five Years from Now for Your Work Today

Although the 2008 financial crisis devastated the global economy, it did provide a wakeup call for Americans to take control of their finances. The reality is that most people don’t understand where all their money goes.

By Cami Hughes

The goal to financial freedom is not as elusive as most people believe; however, it does take some discipline and knowledge of personal finance.

Although the 2008 financial crisis devastated the global economy, it did provide a wakeup call for Americans to take control of their finances. The reality is that most people don’t understand where all their money goes. They end up living paycheck to paycheck and unfortunately they are not able to put money aside for their retirement.

Americans Aren’t Putting Money Aside for a Retirement

National Foundation of Credit Counseling (NFCC) compiles an annual Consumer Finance Survey. In 2010 survey the foundation found that people are starting to understand why it is important to monitor their spending but there is still a lot of work that needs to be done.

According to the foundation about 33% of Americans don’t regularly put money aside for retirement. At the same time 29% admit that they don’t pay their bills on time, which can lead to costly interest payments.

Even worse, the NFCC said that 33% of homeowners who have a mortgage don’t fully understand the terms or how much they are paying in interest.

Track Spending Habits

The easiest way for people to take control of their financial future and profit from their hard work is to create a monthly budget. When people understand their spending habits they can make small adjustments and eventually have more money at the end of the month.

According to the NFCC less than half of Americans don’t use a monthly budget to monitor their finances.

Many consumers don’t realize the impact of their daily expenses, for example spending $5 dollars per day on coffee, which doesn’t sound like much, can lead to a monthly expense of $100. Little changes like making a lunch at home instead of buying a sandwich can make a big difference at the end of the month.

Steps to creating a budget

  • Pay for everything in Cash: It is easier to keep track of expenses by not using credit and there is no worries about carrying a balance
  • Keep all receipts: Even if the purchase was only a coffee or a sandwich ask for a receipt
  • Use a program to keep track of all purchases: There are plenty of free spreadsheet software on through the internet people can use to itemize all their purchases
  • Keep all bank and credit card statements: Make sure all purchases not made with cash matches the statement
  • Review the budget on a monthly basis: By reviewing the budget regularly it is easy to make adjustments to spending habits.
  • Stay within Budget

Consumer Spending Outweighs Personal Income

After creating a budget the next step is sticking to it, which according to the U.S. government is an extremely difficult task.

Every month the U.S. Department of Commerce releases statistics on how much people earn and how much they spend. In April, 2011, disposable income rose by 0.3% from the previous month, however consumer spending rose 0.4% for the month.

Unfortunately this is a recurring the report: In March disposable income rose by 0.4% but spending rose 0.5%. February was even worse as income rose by 0.3% but spending rose by 0.8%.

Although consumers are still living above their means, spending habits are starting slowly change. In 2010 the U.S. government reported that the savings rate increased to 5.7%, which was a massive increase from the 2007 savings rate of 2.1%. Even during the financial crisis, consumers were only saving about 4.1% of their disposable income.

The more financially literate people are the more control they will have over their expenses and in the end save more of their hard earned company.

Cami Hughes is a social media advocate at CreditDonkey.  Entrepreneurs can visit CreditDonkey to find the best small business credit card for their specific needs.  Are you working hard today to profit five years from now?  Leave a comment below with your stories and insights!

 


Send Us Your Comments/Questions


Category: Blog
Keywords: , , ,
Source: Profit Five Years from Now for Your Work Today | Watts Publishing Shop | http://shop.wattspublishinggroup.com