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I came across some interesting statistics today while reading Journal of Financial Planning:
  • America ranks as number 1 among 42 countries for highest percentage (22%) of citizens who have no money left after paying essential bills and spending discretionary dollars (ACNielsen)
  • 28% of Americans with no money left to save at the end of the month in a similar ACNielsen survey six months before (ACNielsen)
  • 9 out of 10 affluent families will lose their fortune by the end of the third generation (Chrisitian Science Monitor)

In my own business I've noticed an increase in the number of clients who hire me to help them figure out why they are still living paycheck to paycheck. In the 1990's, most of my clients wanted to learn how to invest. Today they want to learn how to make their money go further.

I don't pretend to know the reason for this shift or the scary statistics above. I have a guess to offer - overuse of credit to finance daily existence. Financial Planners recommend that payments on your consumer debt (credit cards, car loans and unsecured loans) not exceed 20% of your net monthly income. How does your financial situation look in regards to this standard?
If you're overextended (i.e., payments total more than 20% of your net monthly income), there are a few things you can do to get back on track.

  • Cut back on spending - divert the savings to your debt payments; dine at home and/or pack a lunch for work to enjoy instant savings
  • Stop using your credit cards and debit card for purchases - if the money isn't in your bank account to write the check or you don't have cash on hand, don't make the purchase
  • Curtail impulse buying by only shopping with a list - whether going to the grocery store or the mall, have a list of specific items you need and only buy those items
  • Forego this year's vacation trip - use the money saved to pay down the balance on your highest interest credit card/loan

These are just a few ways to improve your financial health. Take a look at your spending over the last three months (your check register is a good place to start). Identify the "luxury" items or events you bought that you could forego in the near term until your financial situation shapes up. Where will you cut back in your spending this month?
- Catie Fitzgerald


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