Are You Your Own Worst (Financial) Enemy?

• Live for Today, Retire…Never
  The total of your monthly discretionary spending or “fun-money” is more than you save each month. Discretionary spending includes money spent on those items or events that aren’t really necessary such as electronics, entertainment, dining out, sporting events, a new wardrobe, etc. Savings includes money set aside for retirement, an emergency fund, or other goals you may have set for yourself (purchase a home, college savings, etc.). It’s virtually impossible to reach any type of financial goal if you are more heavily focused on spending today rather than saving for tomorrow.
  
  Befriend your finances: Create a budget and pay yourself first by diverting money into a savings or investment account directly from your paycheck. Start making decisions based on your future financial security by allocating only a small percentage of your income to discretionary spending. When the time comes to reap the financial rewards, you’ll be glad you did.


• Minimum Payments, Maximum Pain
  You continue to pay only the minimum (or even twice the minimum) required payment on your credit card(s). If you’re unable to pay off your credit card bill each month, you shouldn’t even be thinking about buying a new HDTV, designer clothes, a new pair of shoes, or anything else for that matter. Just because you still have available credit on one of your many outstanding credit cards doesn’t mean you should continue to spend. If you’re carrying a balance on your credit card(s) and paying absurdly high interest rates, you can do without that new pair of shoes!
  
  Befriend your finances: If you’ve had a solid payment history with your credit card provider, call and request an interest rate reduction. Many credit card companies would be happy to oblige to keep you as a customer. Otherwise, transfer your current balances to a new, lower interest rate card. Paying off your credit card balancesshould be your highest financial priority – make the necessary spending sacrifices in order to pay down the balances as quickly as possible.


• It May Be Time to Grow Up
  The value of all of your “big-boy toys” (televisions, electronics, unnecessary vehicles, boats, ATV’s, etc.) is greater than the total value of your savings accounts. You might be saying “but these items are investments!” No, these are items that are fun and nice to have, but have zero chance of appreciating in value. That is not an investment.
  
  Befriend your finances: Re-prioritize your savings goals and consider whether or not you would be better off selling some of your more valuable “toys” in order to get back on track financially. Seriously consider doing this if you have taken on additional debt as a means of financing the purchase of these “toys”. You may miss having these things for a short period of time, but in the long run, the peace that comes with financial security will prevail.


• Don’t Leave Cash on the Table
  You ignore or disregard sources of “free” money. Does your employer offer to match your retirement plan contributions? Does your employer offer to deduct pre-tax amounts from your paycheck for flexible spending accounts or transportation reimbursement? Have you taken it upon yourself to do the necessary tax planning so that you don’t provide Uncle Sam with an interest-free loan each year (your tax refund)? Free money. Free money. Free money. Go get it.
  
  Befriend your finances: Don’t leave money on the table. Take advantage of every last penny of a matching contribution or tax-deductible savings account. It’s literally money in your pocket. In addition, use the tax withholding calculator on the IRS website to determine your expected tax shortfall or refund and adjust your withholdings accordingly so that you neither pay nor owe additional tax at year-end. (http://www.irs.gov/individuals/article/0,,id=96196,00.html)


• No Cushion = A Hard Fall
  You have no emergency savings fund. I’m not referring to the jar of coins that sits on your dresser, but an amount of easily accessible cash (preferably in a bank earning interest, not a shoebox) that will cover at least 3-6 months of living expenses. The most likely reason for a lack of emergency savings it that you have chosen to spend instead, i.e. you live paycheck to paycheck. If this is the case, you’re only a pink slip away from financial ruin.
  
  Befriend your finances: Start building an emergency savings fund today. Have a specific amount deducted from each paycheck and deposited directly to a savings account. Refrain from tapping into this money for impulse buys, vacations, etc. – it is for emergencies only!
  
  It’s important to regain your sense of financial self-control to achieve financial maturity. Small changes that you make today can go a long way toward building a solid financial future, but the key is to get started now – don’t wait! It takes strength and determination to battle our enemies, especially when the enemy is you!