Apparently, a lot of people are still living with too much debt. You would have thought that we have learned our lesson by now when it comes to avoiding money problems. That is not really how things turned out.
With an improving economy, the average American consumer have a better chance at dealing with their credit difficulties. Unemployment is going down and consumer spending marks an increase in consumer confidence. But while that improvement should have been good news, we don’t seem to be reacting well to it. Recent data revealed that we have been taking in more debt – again.
According to the data released by NewYorkFed.org, the increase in household debt amounted to $241 billion from Q3 to Q4 of 2013. This increase is said to be the biggest jump since Q3 of 2007. The biggest increase still came from mortgage debt that increased by $152 billion. That is followed by student loans that increased by $53 billion and auto loans with a growth of $18 billions. The total consumer debt by the end of 2013 is now $11.52 trillion.
With so much debt, it is evident that our money problems are far from being resolved. In fact, a recent study from Wells Fargo revealed that one out of three Americans are still losing sleep over their finances.
Important insights about the financial problem of Americans from Wells Fargo
The result of the study done by Wells Fargo came from an interview done from November 12 to 17, 2013 on more than a thousand adults. The study concentrated on consumer between the ages 25-75 years.
The study published on WellsFargo.com revealed a couple of important insights about the money problems of Americans towards the end of 2013.
Consumers are still stressed over their money.
According to the study, 33% of respondents still lose sleep when they think about their current financial condition. Not only that, 39% of consumers reveal that of all their problems, financial difficulties is the major cause of stress in their life – or at least, it is connected with money. 39% also say that they feel a lot more stress about their money problems now compared to the same time last year.
Consumers regret wrong decisions about saving and spending.
The study also revealed that 49% of them regret not saving enough and spending too much. That is the major regret that they generally have in their life. It comes ahead of physical health (42%), personal relationships (21%), and improving their career (16%).
Consumers made a lot of mistakes because of financial illiteracy.
According to the study, consumers believe that their lack of knowledge in pursuing a healthy financial life is a major barrier in improving their finances. 35% mentioned that knowing the best approach can be confusing. 35% also revealed that they find it hard to stick to their plan. 9% said that motivation is the problem that kept them from having a healthy financial life.
Consumers give more importance to their finances compared to their health.
One out of three Americans revealed that they are more concerned about their financial health than physical health. This means they will work harder and longer hours just to earn more money – even if it will burn out their physical health.
Consumers still fail to grasp the importance of a financial plan.
Only one out of three consumers have a financial plan – or even a household budget to help them improve their financial health. It does not come as a surprise that only 33% feel good about their ability to retire comfortably.
These observations that we have taken from the results of this study reveal that money stress is still a prevailing concern for everyone. These statistics will make you understand just how difficult it is for consumers to feel confident about their finances.
What financial mistakes are we still committing?
With the reports of an improving economy and rising job statistics, you can safely assume that the blame is on the financial decisions that consumers are making. To be blunt about it, we are to blame for our respective money problems. Despite what is going on around us, we made the choices ourselves and nobody forced us to take on debt if we did not have to.
In fact, the mistakes we made are revealed in the Wells Fargo study. Apparently, people will give more time on their car (82%) or a vacation (69%), rather than spend time to review their personal finances (43%). Not only that, people have more time updating their social network profiles (47%) rather than look at their finances (25%). People spend more time pursuing entertainment activities like watching TV (65% spent no less than 2 hours) instead of their finances (34% spend only 15 minutes a day on it).
These alone show us that our priorities are screwed up. At a time when we are financially in trouble, that is the time when we choose to spend less time on reviewing our finances.
In another study published on Principal.com, Principal Financial Services conducted a study on American workers to reveal the most common financial blunders in 2013. The study showed the following as the top 5 mistakes that consumers made last year.
21% did not saving enough
9% incurred too much credit card debt
8% added more debt to their current balance
7% did not budget properly
7% spent more money than they can afford
In the same study, it also revealed that top 5 budget hindrances of consumers that led to the failure of their budget plans. It seems that the reason why people cannot stick to their budget is primarily because of dining out (22%). That is followed by food and groceries (21%), gas (20%), entertainment (15%) and clothing or shoes (15%). Only food is really considered as a must because the rest can be lowered so the consumer can stick to their budget. In other words, it is not a matter of life and death if the consumer cuts back on these expenses.
If you really want to understand budgeting and how to succeed in it, you need to do something about these hindrances.
4 simple steps to improve your financial situation
We have four simple steps that can hopefully help you with your money problems.
Step 1: Know the problem.
You need to be aware of what is keeping your finances from improving. Is it your bad financial habits? Or is it a lack of income? It can also be problems with debt that is dragging you down. You have to identify these so you know what you need to concentrate on to improve your personal finances.
Step 2: Create a plan.
Now that you know the problem, you should be able to create a plan that will directly solve it. If it is a lack of income, you can take on a second job to boost your finances. If it is too much debt, you can simply look for a debt relief plan that will help you pay down your debts.
Step 3: Implement the plan.
The third step to solve your money problems is to implement your plan. This is where the challenge will really start. Most people create plans that will help improve their finances but end up failing anyway because of poor implementation.
Step 4: Enforce the right attitude.
More than implementing your plan, it is also important that you enforce the right attitude towards it. That means you have to change certain mindsets or habits so that after the plan is successfully completed, you will not make the same money mistakes again. Hopefully, that would mean you don’t have to lose sleep over money problems anymore.
Diana hates debt just as much as you do. She is a finance writer for National Debt Relief. She aims to provide the best information to win the battle against debt.