The holidays are an expensive time. According to the National Retail Federation, Americans spent $802 on gifts, decor and other holiday items in 2014. If their estimations hold true, that number will be over $1,000 this year.
Many people tend to spend a little more over the holidays. It’s the season of giving and many people like to give generously to family, friends and chosen charities.
The problem is the tendency to overdo it – and not just during the holidays. Among households with credit card debt, the average balance is $15,355.
That number would be bad enough, but there are other bills to pay. The average mortgage balance is $165,892 and the average student loan debt is $47,712.
That doesn’t mean you should stop looking to buy a house or that you have to know Bill Gates in order to pay off a college degree. And let’s face it, every once in a while you need to charge something to the plastic. It just means you need to be smarter at spending money.
Our Bad Habits
The first step to recovery is admitting where the problems lie. We asked financial experts to share common consumer problems and their impact. We also included a handy dandy infographic with tips on how to keep your financial resolutions.
The Rent Is Too Darn High
Are you spending too much on rent? Will Lipovsky of First Quarter Finance certainly thinks so, and he has the stats to back it up.
He pointed out that about half of all renters are spending more than 30% of their income on housing. That number is high enough, but it makes matters worse when you realize you’re not getting anything out of the transaction in terms of equity. It’s a one-way street where you put money in and get nothing back.
Lipovsky also said that when you spend so much on rent, it’s difficult to save for a down payment even if you want to buy a house. It’s a serious issue.
We’re Not Savers
We all have a lot of bills and end up spending a considerable amount of money, but we may be doing this at the expense of our golden years, according to Rachel Hernandez. She’s an author and real estate investor from Adventures in Mobile Homes.
She points to a recent survey from Bankrate showing that 1 in 10 Americans aren’t saving for retirement. This causes issues down the line because if they’re not saving on a consistent basis, they may run out of time when it comes to retiring and have to work beyond age 65.
Your credit report gets pulled for many major purchases, including your car, home and even your insurance. We rely on our credit history to get approved and get better rates. With that in mind, it might surprise you to know that more than 25% of people surveyed in a 2012 study by the Federal Trade Commission had at least one material error on at least one of their credit reports.
Author Valerie Rind said that the problem with this is that it can lower your credit score and impair your access to credit without your knowledge. Fixing the problem by calling the creditor or credit bureau can sometimes be frustrating, taking away time you’d rather be spending on other things. Checking your credit report annually can give you time to make sure things are accurate so you can keep your credit score in good standing.
Too Much Holiday Cheer
It’s not uncommon to spend a little more during the holiday season. There are presents to buy (and let’s not pretend none of those Black Friday purchases are for yourself). Then there are the parties, where you definitely can’t show up empty handed. Most people also do the majority of their charitable giving during this time.
Karen Cordaway, a nationally syndicated personal finance writer, says where we run into trouble is blowing the budget. A recent survey by Coinstar revealed that 62% of consumers are expected to spend an average of $140 more than the budget they set for the holidays. It’s a 20% increase from what they expected to overspend last year.
Swiping the Plastic
He points out that the average U.S. adult with a credit card has $5,596 worth of debt on the cards alone. If you make only the minimum payments on that debt, it would take you 10 years and cost $2,441 in interest to pay it off.
Emphasis on Physical Gifts
We’ve all been given that questionable sweater we know we’re never going to wear. What we may not think about is just how widespread the occurrence is, and its financial impact.
Jason Hull, a certified financial planner and chief technology officer for MyFinancialAnswers, shared that in 2011 Americans spent at least $46 billion on holiday gifts that people didn’t want. How big of a deal is that?
Instead, consider donating some of that money to organizations that can ensure your funds have a longer lasting effect than another wrapped gift. Hull estimates that if Americans lowered their spending by 10% and donated that money, we could build 36,800 Habitat for Humanity homes, communities could house more than 273,000 homeless people, or 2,300 veterans wounded in combat could receive long-term medical care.
Developing Better Habits
You can point out problems all day long, but it’s not constructive. Problems are just opportunities waiting for solutions.
We asked the experts to provide some answers to these pressing money problems. You can check out what they told us in the infographic below.
How do you plan on putting these tips into practice in your own life? Share with other readers in the comments.
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