4 Reasons That People Fail With Their Finances: What I Have Learned As A Credit Counselor

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[The following is a guest post by Kevin, a credit counselor who blogs at DebtEye]

Over the past few years, I’ve met with hundreds of clients face to face who were looking to get out of debt.  They come to me looking for tips & advice on different ways to get out of debt.

As a credit counselor, we must closely examine their financial health before recommending any type of debt relief program.  I usually preface the counseling session with, “How did you get into debt?  What happened?”

After listening to their stories, it’s interesting how you can see a pattern after speaking with hundreds of people in debt.  You would probably think that a lot of them suffered some sort of catastrophic financial hardship such as: losing a job, death in family, or unexpected medical expenses, without an emergency fund.  Think again!

4 Reasons People Fail With Finances: What I Have Learned As A Credit Counselor

After listening to my clients, here are the patterns I started to notice:

Huh?  What does APR mean:  I ask all my clients to bring in a copy of their most recent credit report, or a copy of their latest credit card statement.  When I ask them what their APR is (before I look at their statement), most of them have no clue what I’m talking about.  Everyone who carries credit card balance should ALWAYS know how much in interest their paying every month!  Read the fine prints!

I think I spend $200 in food: If I asked you how much your mortgage was, or even your car payment, chances are that you would be able to tell me right away.  What if I asked you how much you spend on food every month?  Most people don’t keep track of their expenses.  I know it sounds cheesy, but starting a budget worksheet will help you organize your finances.

Your mortgage is how much? : What ever happened to the 31% housing ratio rule?  Do people not follow it anymore?  Over 60% of the clients had their housing ratio 31%+.  It’s no wonder they have no money left over every month!  When you plan to buy a house in the future, do yourself a favor:  Stick with the rule, or be part of the statistics (like one of the many going through a Bank of America foreclosure).

Today, today, today: Most people only care about the present.  They only care about how much money they can save today.  How can I lower my monthly payments this month?  If I borrow money today, I can pay it back tomorrow.  This is a dangerous path to follow.  Stop thinking about today, and start thinking about the future!

I’m sure many of you may be guilty of some of the things I mentioned.  If you’re not in financial distress, consider yourself lucky!  I recommend everyone to really take a close look at your personal finance.  I don’t want to see any of you in my office!

Kevin is a co-founder @ DebtEye where he helps people get out of debt by finding the optimal solution to pay off credit card debt.  He is a certified credit counselor and previously owned a credit counseling company before joining the DebtEye team.

photo by Chris Sharp

Be Sure To Budget Fun Into Your Family Finances

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[The following is a guest post by Miranda Marquit, about the need to budget fun into our finances]

Budget Fun Into Your Family Finances

When many of us think of budgets, we immediately groan – and think of restrictions. While it is important to make sure that you save money, get good deals and avoid debt, you also need to think of your budget as a way to enable you to have fun. While you’re going through your monthly budget, make sure that you include a little enjoyment.

Prioritizing

Part of effective budgeting is prioritizing your spending. Think about what is important to you, and what you really like to do. If you enjoy playing video games, don’t impulsively spend money on a new DVD. Budget your discretionary income so that you can be the things that are most important to you.

This can also include saving up for a vacation or a major purchase. Remind yourself that your priority is to enjoy that family trip. Budget your money so that you can set some aside in savings so that you can go on your trip in four months instead of seven. When you are budgeting in the fun stuff, you need to make sure that your spending reflects your values – and you need to make sure your needs (food, shelter, transportation, etc.) are covered first.

Inexpensive Fun

The fun category in your simple budget doesn’t need to be huge in order for you to enjoy yourself. There are plenty of entertaining things you can do for less. Sign up for daily deals and discounts to see if you can score a promo price on some of your entertainment and recreation costs.

Also, consider low-cost activities. A picnic in the park is a great activity – and it doesn’t require a large expenditure. Bike riding, family game night, a Red Box movie with homemade popcorn, and a neighborhood scavenger hunt are all low-cost activities that everyone can enjoy.

You can even save money on family outings. Go to a matinee, or go to the $2 movie, instead of visiting an expensive theater during the evening. Instead of getting goodies at the show, go out for ice cream afterward. Look for discount passes, free admission days and local specials at museums, amusement parks and zoos. During the summer, many city parks feature free concerts.

When you make your fun budget, make sure you consider the ways you can save money and have a little inexpensive fun. You might find that the “fun” portion of your budget doesn’t need to be as big as you thought.

Bottom Line

Leaving fun out of your budget can leave you feeling deprived. However, it doesn’t have to break the budget. Carefully consider how much you can spend on enjoyment each month, and then look for activities that fit into that budget. With some creativity, and a focus on activities that provide you the opportunity for some family fun, you might be surprised at how much fun you can have, no matter your budget.

Miranda writes for a variety of personal finance web sites, including the AllBusiness Personal Finance Corner and InsuranceQuotes.org, a site specializing in online insurance quotes.

photo by photostock