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Resolve Bad Spending Habits in the New Year - Quicken Loans Zing Blog

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.

Credit Errors

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

As of mid-November, the average credit card interest rate was 14.96%. Steven Donovan, writer and founder at Even Steven Money, says all of this interest is killing our finances.

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.

Personal Finance Infographic

How do you plan on putting these tips into practice in your own life? Share with other readers in the comments.

This Post Has 11 Comments

  1. I went on a buying spree after the death of a loved one. I ran up a credit bill of 5 figures, I wound up having to sell a piece of rental property. It was a rude awakening to a serious problem. Your payments have to well above the minimum amount due, or you could wind up paying only pennies above the interest. I no longer use any credit cards. My debit card works just easily and I have no fear of a repeat performance. If you are concerned of using your credit on line, set up a Pay Pal account.

    1. These are good tips for getting back on your feet. The one caution I would make is that responsible credit usage is healthy and even necessary in order to get loans for major purchases.

  2. This is good advice, however; this excludes those already in retirement and it may surprise you to learn that many already retired persons have the same kind of credit card problems as those who are still working. Many of these problems began with the financial “meltdown” in 2008 and ’09 but not all. It would be better information if you included these “forgotten” members of our society. I say forgotten because retirees were not even considered as a voting group in our national election but I am sure they played a part since most retirees vote.

    1. Hi Carol:

      I think retirees played a big role in this year’s election as they do in many areas. We’ll definitely take your advice into consideration to have more of this budgeting content aimed at retirees as well.


  3. Put your savings where you can not get your hands on it. Something like Sharebuilder at Capital One where you can dollar cost average stocks that pay dividends. Just transfer the funds and the plan will make the buy for you and ten years from now you will be very happy.

  4. Gotta love getting good habits in place. If you routinely make wise decisions, one screw up here or there isn’t going to matter.

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