Thursday, February 23, 2012

Money Lesson: Stop Torturing Yourself

i'm gonna punish you / wait i'll punish myself for you / okay. at least i'm in control

 I have a confession...sometimes I procrastinate and allow issues to linger instead of tackling them right away. A few weeks ago, I was working on a task at my job but I just could not get myself to take the actions needed to finish it. For some reason, I felt this task was so daunting and so time consuming that I just wanted to avoid it at all costs. i knew I would have to finish the project eventually, but at the time I chose to let it sit on my desk for a few days while I kept myself busy with other work that was equally as important but probably less urgent. The problem is that each day it sat on my desk, my anxiety regarding the work increased and what should have been a proverbial "molehill" quickly became a "mountain" in my head. Finally, one day I came to my senses. I asked myself, Why am I spending all of this time agonizing over this work when I can just buckle down and finish it?

I've created similar scenarios while working on my finances. I know I have spent more hours worrying about how much I owe in studnt loans than actually creating a solid plan to pay them off quickly. I've purchased items that I quickly realize that I will never use, but instead of going to get a refund, I would just put things away in my closet as I worry about going over my budget for the month.

 Some of you may have the same problem that I have of putting myself through unnecessary suffering. Do you find ourself avoiding the mailbox because of the many final notices you get, or notice your heart racing when the phone rings for fear that it may be a bill collector...BUT you go shopping every weekend faithfully(and never coming home empty handed, might I add)? Or maybe you feel yourself drowning in debt, but rather than reaching out for assistance (negotiating new loan terms, exploring economic hardship provisions, getting credit counseling or financial planning assistance) you suffer in silence  day after day.

 Well I'm here to tell you: Stop torturing yourself! Do whatever is needed to rid you of the burden of your financial worries. Action is the first step in obtaining freedom, so imagine how good you will feel when you trade in your procrastination, avoidance, and associated stress for knowledge, progress, and ultimate achievement!

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Thursday, February 9, 2012

How Your Mindset Hurts Your Finances: 3 Examples

make it rain guys pictures, backgrounds and images

“I work hard to make this money, so I’m going to enjoy it!”
It’s true, you probably worked hard to earn your money.  But think about all the hours you had to put in to earn your salary…then think about how quickly money can fly out your hands.  It only takes minutes to swipe your debit card and lose $50 on a “quick run” to Target, or to hit the checkout button at Amazon and purchase the assortment of items that you’ve had patiently waiting  in the shopping cart.  Spending money is easy-it’s quick, there are so many ways to spend it, and lots of people who get paid to entice you to spend.  Because spending is so easy to do, it is easy to get yourself in trouble by overspending, sinking into debt, and racking up credit card interest charges or bank overdraft fees.  Also, maintaining the habit of spending all your money is risky; in the event of an emergency—such as illness, job loss, or needing household repairs—you will not have the money to cover these unexpected expenses, which would then lead you into debt.

“I’ll worry about tomorrow when it gets here!”
If retirement is over 20 years away, it may not be one of the things at the forefront of your mind, but ignoring it can have dire consequences.  You don’t want to work until you are 70 years old because that’s the only way you will have enough money to survive.  There may come a time when you are no longer able to work to support yourself; the decisions you make today can affect your financial security and the quality of your life during that time.  In addition to planning for retirement and funding a retirement plan, it’s important to consider what the future economy will look like.  Consider inflation, which means that the dollar you have to day will have less purchasing power in the future.  Skimping on your retirement contributions or underestimating how much is needed in the future will leave you with an unpleasant surprise when retirement age arrives.  Lastly, procrastinating when it comes to retirement contributions—or even procrastinating about adding to your savings account—means you miss out on the benefit of time.  The earlier the save, the more time you have to make your money grow.  "Someone who puts $4,000 a year into retirement accounts starting at 22 can have $1 million by age 62, assuming 8% average annual returns. Wait 10 years to start contributing, and you'd have to put in more than twice as much -- $8,800 a year -- to reach the same goal."


“I can afford that, it’s ONLY $x (or $x per month)!” 
A low purchase price may make you feel better about spending your money, but make no mistake-there are more factors to consider when making a purchase.  A low price means very little if the item you get is of poor quality and will need to be repaired or replaced in the near future.  Also, the purchase price is hardly ever the “real” price of an object.  Whether it is tailor fees for a jacket, replacement ink cartridges for a new printer, or a data package for a new cell phone, most purchase require additional service charges.  Ignoring these additional costs can result in a seemingly minute cash expenditure that creates a big dent in your budget in the future.  Likewise, signing up for monthly subscriptions like gym memberships or cable services can negatively affects your budget  as you are increasing your fixed monthly expenses, leave you more cash strapped each month.   You are agreeing to regularly pay a guaranteed debt, while your future income may not be guaranteed.  The future is unknown, and in the face of an emergency, you may find yourself unable to meet these financial obligations.  There may be fees for late or missed payments, and even penalties for cancelling these services, so it is in your best interest to think long and hard before entering into one of these agreements.