With good intentions, we sometimes get in our own way when it comes to improving our financial health.
Photo by Mikhail Nilov
Just like physical health, financial health can be affected by binging, carelessness, or simply not knowing what can cause harm. But there’s good news – as with physical health, it’s possible to reverse the downward trend if you can break your harmful habits.
No Budget
A household without a budget is like a ship without a sail or rudder, drifting aimlessly and – sooner or later – it might sink or run aground in shallow waters. Small expenses and indulgences can add up-to large amounts over the course of a month or a year. In nearly every household, it might be possible to find some extra money just by cutting back on non-essential spending. A budget is your way of telling yourself that you may be able to have nice things if you’re disciplined about your finances.
Credit Card Usage
Credit cards always seem to get picked on when discussing personal finances, and often, they deserve the drawback they get. Not having a budget can be a common reason for using credit, contributing to an average credit card debt of $6,913 for balance-carrying households.¹ At an average interest rate of over 16%, credit card debt is usually the highest interest expense in a household, several times higher than auto loans, home loans, and student loans.²
The good news is that with a little attention to detail, you can start to pay down your credit card debt and help reduce your interest expense.
Elephant in the Room
No matter how much income you have, money can be a silent or stressful topic in families. This can lead to one of two potentially harmful habits.
First, talking about the family finances is often simply avoided. Conversations about kids and work and what movie you want to watch happen, but conversations about money can get swept under the rug.
Are you a “saver” and your partner a “spender”? Is it the opposite? Maybe you’re both spenders or both savers. Talking (and listening) about yourself and your significant other’s tendencies can be insightful and help avoid conflicts about your finances.
If you’re like most households, having an occasional chat about the budget may help keep your family on track with your goals – or help you identify new goals – or maybe set some goals if you don’t have any.
Second, financial matters can be somewhat confusing – which may cause stress – especially once you get past the basics. This where you may tempted to ignore the subject or to think “I’ll get around to it one day”.
However, getting a budget and a financial strategy in place sooner rather than later may actually help you reduce stress. Think of it as “That’s one thing off my mind now!”
Take care and the time to understand your money situation and getting a budget in place is the first step to put your financial house in order. As you learn more and apply changes – even small ones – you might see your efforts start to make a difference!
¹ “2020 American Household Credit Card Debt Study,” Erin El Issa, Nerdwallet, Jan 12, 2021 https://www.nerdwallet.com/blog/average-credit-card-debt-household/
² “2020 American Household Credit Card Debt Study,” Erin El Issa