Are you trying to think of personal finance improvements that you can do this year? Well you and the multitude of Americans are thinking of the same goal. Regardless if you want to improve your finances by getting rid of your debt or building up your savings, this is an innate need in everyone. We always strive to improve what we have today with the intention of making our future a lot more comfortable and convenient.
However, we all know it is easier said than done. Although the government reports that the economy is steadily improving and jobs are being created, we have yet to feel any financial recovery – at least, this is true for most of us.
According to an article published on Business.Time.com, the average American household is still poorer compared to 7 years ago – before the recession. The article mentioned a research done by William Emmons and Bryan Noeth. They are both economists of the Center for Household Financial Stability. The research mentioned that the inflation-adjusted net worth of the average household in the country is at $626,800. This is said to be 2% lower than 2007’s $645,100.
You can argue that we are almost there but you also have to consider that consumer debt is also steadily rising. Despite the lower mortgage and credit card debt during the post recession, the increasing student loans and auto loans gives us a higher end total. We are not gaining much net worth and we are continually taking in more debt. That is not a pretty picture for someone who wants to build a better financial life for themselves.
Why is it difficult to improve your personal finances
Have you ever asked yourself why it is difficult to improve your finances? We all know it is important. But somehow, we are not really gaining ground in making it happen.
Well we have identified 4 possible reasons why it is hard for us to take our personal finances to the next level.
We live in a consumerist society.
The first reason is our consumerist society. Consumerism is defined as the need to buy things in excess. In an economy that thrives on consumer spending (which is actually 70%), you know that everyone’s priority is to make consumers spend as much as they can. This is how business thrive, how the government earns through taxes and how people are compensated. According to an article written in the American Psychological Association, out society urges us to spend. The article published on APA.org mentioned that “Advertisers spend millions researching how to induce us to purchase.” Products like credit cards are created to help us give in to the impulse to buy – even if we cannot afford it. If you want to improve your finances, you know that you have to make smart choices about your spending. In other words, you need to limit your spending to what is essential so that you will have the extra money to save or invest. That is how you start improving your wealth.
We have so many decisions to make.
Another reason why it is difficult to take our finances to the next level is because things have become too complicated. Now we have a lot of decisions to make. For instance, when we are successful in increasing our income, where should it go best? Should you pay off your debts, save or invest? When investing, which is the better option: mutual funds, bonds or stocks? When saving, where should you put your money: bank account, retirement fund or under your mattress? These all seem tedious and sometimes, we just pick without really finding out if it is the best option. That compromises our plan to improve our money.
We have an ever growing list of basic necessities.
In the past, we only worried about food, water, clothing, and shelter. Now we also worry about communication, transportation, and education. These are also important additions to our necessity list. Not only is the list growing, it also gets complicated. Take for instance food. We all know that it will always be a necessity. But now, our choices include eating at home or eating out. WiseGeek.com reveal statistics that tell us that the average household eats out once a week. The food expense of eating out comprises almost half ($2,700) of the food budget ($6,000) of the average American family. Imagine how we are wasting money by eating out when we have the option to eat at home? That is how our mindset is so distorted by the changes that have happened to our society.
We always want to upgrade our lifestyle.
Lastly, we always have this need to upgrade our lifestyle. You may be wondering – but that is the whole purpose of this article right? True but the problem with this is we are upgrading our lifestyle based on how society wants us to upgrade it. Most of the time, we try to keep up with the Joneses’ who does nothing but buy stuff that end up as junk in a few years. You need to avoid this type of lifestyle upgrade because it will not get you anywhere. Live according to what you think you need to enjoy life and make sure that it is within your financial capabilities. Nothing too extravagant because there are better places to put your money into.
These four are seemingly harmless reasons but when you think about it, they all have a big influence in our money mindset. You need to change that if you really want to improve your finances.
4 needs you can tap into to motivate your quest for financial improvement
As you work on changing your mindset, you may want to look into the following needs that can help motivate you to put your money in a better position. Of course, money management can make your dreams come true – especially when it comes to improving your finances. But motivation also has a big part to play in it. So here are 4 needs that you should look into.
Need to live. The first is your need to live. We all strive to improve our financial life because we want to have the means to provide for ourselves and those depending on us. Use your need to live to motivate you to work hard to improve your life.
Need to have a quality lifestyle. We do not only want to live, we want to do so comfortably. We do not just want to eat. We want to eat well. We do not just want shelter. We want a home that will support the type of life that we want to live. You need the money to make sure that you and your family are well provided for.
Need for financial security. Apart from living well, you want the assurance that your future is secure. Anything can happen to shake your comfortable lifestyle. You want to make sure that any sickness or job loss will not endanger the life and assets that you have worked so hard to acquire.
Need to enjoy life. Lastly, you can use the motivation to enjoy the life that you want to live. That can be a powerful force to urge you to work hard to achieve a better debt free life. Why debt free? Because you want to have 100% of your money focused on your quest to improve your finances.
To improve your finances is just the first step that you need to take. Just make sure that you set your goal clearly and you have a plan to make it happen.