Cash and Debt Management

Introduction

Do you have enough money? Most people answer ‘no’ when asked that question. You’ve probably seen the surveys... it doesn’t matter what your income is. Secretaries making $30,000 and stockbrokers making $300,000 all report that life would be much better if they just earned 10% more.

The secret to keeping more of your money lies in controlling your expenses. In order to accomplish that, you have to make a conscious effort to monitor where your money goes. Take some time to examine your priorities and get your expenses in line with them.

That is the essence of financial planning; thinking and planning in the short term in order to secure a healthy financial future.

People Aren’t Saving Enough

In the 1970s, personal savings represented 8.2 % of Gross Domestic Product. In the 1990s, that percentage dropped to 4.0 %.  In recent years, the personal savings rate has actually gone negative (Source: Bureau of Economic Analysis).

People are saving less at a time when they need to be saving more.

Racking Up Debt

It’s never been easier to get into debt. Furniture companies will let you furnish your apartment for no money down, no payments for six months, or even a year. You can take three or more years to pay. Car dealers will let you buy or lease a car, sometimes with no money down. You can stretch the payments out for as many as six years. Home Equity loans or lines of credit can be gotten in a matter of hours. If you’re a college student, you’ll get unsolicited credit cards in the mail complete with large credit limits.

In some ways, easy credit is good. If you’re starting out or starting over, credit can put a roof over your head and bread on the table and give you time to get on your feet. And, for people who are very disciplined, credit can be a way of keeping track of expenses. Some people put almost every penny they spend on credit cards, so they will have an itemized list each month of exactly where their money went.

But many people aren’t that disciplined. For them, credit is a way of having things now instead of later. That’s fine if there’s enough money later to pay for the things. But if there isn’t, that means mounting bills, credit card balances, and big-time debt.

How much debt is too much? Take the following quiz to see if debt is a problem for you.

If you answered yes to two or more of these questions, you need to take a long, hard look at your finances.