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What money problems keep you up at night? Are you living paycheck to paycheck, struggling with credit card debt or seriously worried about your long-term financial plan?
Most of us aren’t strangers to worrying about money. But the good news is, many of us share the same common problems and concerns when it comes to finances.
We polled Living Well Spending Less readers to ask about YOUR biggest money concerns. The answers were pretty universal. It seems almost all of us worry about the same financial conundrums. Most of us struggle with common concerns like not having enough savings, wondering how on Earth we’ll ever pay off our student loans or trying to figure out how to pay our grocery bill and food expenses each month.
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Maybe you’ve set a big financial goal like saving for retirement, paying for a child’s college or having enough for a down payment on a house and starting a mortgage. These goals are definitely attainable, but they require the right plan. When it comes to finances, many of our readers struggled with how to stop living paycheck-to-paycheck and find the path to make those bigger goals happen.
So, if you share in a few of these common money problems, let’s explore how to resolve them once and for all. Here are your top ten biggest money problems solved!
How can I stop living paycheck-to-paycheck?
Living paycheck-to-paycheck is a struggle. Many of us work to make ends meet and feel we’re never getting anywhere financially. We know at the beginning of the month there’s money in our bank account and by the end we’re praying our debit card won’t get declined at the gas station. It’s scary and tough.
The first step to resolve the paycheck-to-paycheck issue is to take an honest look at your budget and your finances. If you’ve been floating without a strict budget, it’s time to start getting it under control. Use this simple budget 101 worksheet to get started and write out the basics. What is coming in and where is the money going out?
You may need to review your spending for a month or two to get a true handle on where your money goes. Many banks offer the option to download debit information right into a spreadsheet, where you can sort it by category. Look at your grocery expenses, your utilities, and other areas like entertainment.
Once you’ve set up a budget, identify the spots where you can cut back to find more wiggle room in your finances. If you don’t see any flexible areas, you may want to consider if you’re living within your means. Is it time for bigger decisions like considering a smaller house, a cheaper car or a second job to help you get on your feet?
What are some realistic ways I can reduce my food and grocery bill?
A budget area many of us struggle with is our food expenses. It seems food quickly takes up a HUGE chunk of our budget and we barely realize it’s happening. Part of the problem is food seems like a small and often necessary expense. We can always find room to treat ourselves to lunch, enjoy a dinner out, or buy extra items at the grocery store. After all, we all need to eat, right?
Unfortunately, food expenses really add up fast. For a family of four, going out to eat a few times a week adds up to hundreds of dollars per month. Tack eating out expenses onto a grocery budget spent on food wasting away in the fridge and suddenly food costs almost as much as your mortgage!
The good news is, when it comes to cutting back on food spending, there are plenty of ways to get your grocery budget under control. Start cooking and enjoying meals at home instead of going out to eat. Commit to preparing meals on the weekends to give you plenty of options on busy weeknights. Find easy options to purchase on sale, make ahead and freeze for later.
Saving on your groceries will slash your food expenses immensely. Always plan your meals ahead and go to the store with a list. Prepare ahead to find rock bottom prices, stock up on basics when they’re on sale and keep your pantry ready with cheap, easy-to-prepare options to help you avoid the call of fast food and restaurants.
Help! I have no savings! Where should I start?
Another common concern amongst our readers? Not having any savings. Even if we’re working to make headway on our budget, eat at home more often and cut back on expenses, if we’re in debt it’s hard to build up savings. One disaster will derail our finances and knock us back to square one.
If you don’t have savings (and it’s keeping you up at night), it’s time to start an emergency fund. Having a “savings account” seems nebulous and unfocused if we don’t set a clear savings goal. If we’re also in debt, it’s hard to weigh out the pros and cons of building up savings or paying off debt and which to tackle first.
An emergency fund of $1,000 is like an insurance policy. If plans go wrong, you have a fund built up to address the issue. An emergency fund protects you from swiping your credit card and adding to your debt each time life throws you a curve ball. When the car needs new tires or the dog needs to go to the vet, an emergency fund will protect you from making tough financial choices.
If you’ve discovered any wiggle room in your budget at all, put the extra money toward building your emergency fund to start. Pay the minimum payments on all debt, until your savings is in place. Put as much as possible into your emergency savings until you hit your $1,000 goal.
I’m drowning in credit card debt—how can I make headway?
Credit card debt feels like a crushing weight. Even if we’re able to meet our minimum monthly payments, high interest rates add up quickly and suddenly debt spirals out of control. A few of us have even reached crisis points where we’re paying off credit cards with other cards, further escalating debt.
It’s time to reverse the cycle. If you want to get your credit card debt under control, the first step is to stop spending. Cut up your card (or at least hide it away). Stop the habit of spending money you don’t have and start to turn the trend around.
Once you’ve stopped using your credit card, apply what financial guru Dave Ramsey calls the “Debt Snowball.” After making your minimum payments on all cards, determine what you’re able to put toward paying off your debt. It might be $20 a month or $200. Find as much as possible to work on breaking the debt cycle.
Pay the extra toward your lowest balance. Each month pay the minimums on all cards and put the extra toward the smallest debt. Once your smallest debt is paid off, move to the next smallest debt and so forth. As you pay off more debt, the extra amount you can put toward the balance increases, building momentum and progress. Pay off your debt and commit to breaking the credit card habit!
What should I do about my student loans? Am I going to pay them forever?
Student loan debt is a huge issue for many young families. Often the interest rate is high and unlike other debt, there’s no option to file bankruptcy or default on the loans. The balance will continue to follow you throughout your life and career until it’s paid off.
If you or your spouse has returned to school, work hard to pay as you go rather than taking on additional debt. Apply for scholarships, financial aid and grants, and work on a plan to pay each semester (or only take a few classes at a time). Taking on crushing debt to finish a degree might cripple your options later.
If you have loans you need to pay off, include them in your debt payoff “snowball.” Many student loans are 30-year plans, but paying them off faster will save you a bundle. Often by the time the loans are paid off (if you follow the 30-year plan), you’ll end up paying far more in interest than the amount of the original loan.
Student loans are one of life’s realities many of us must face, but don’t surrender to the idea that you’ll be paying on them for the rest of your career or until retirement. Work to pay loans off as quickly as possible and break free from debt.
We have no long-term financial plan. How do we prepare for the future?
A common reader concern is that many of us feel like we don’t have a long-term financial plan. If you fall into this category, take heart. In life, none of us can predict what’s going to come across our path. Job changes, life changes and unforeseen circumstances are often beyond our control. We can only plan and hope for the best.
If you have a budget, you’ve worked to save up the cushion of an emergency fund by actively cutting your expenses and you’re paying down your debt using the snowball method, you’re definitely on the right path!
Many of us get ourselves into financial holes and we can’t see a light at the end of the tunnel. We look at our debt, our mortgage, and future plans and we wonder if we’ll ever be able to retire or simply relax! One of the keys is to take money one step at a time. Get your budget in place so you have a roadmap to guide you. Once your debt is paid off, start to ramp up your saving and investing for retirement. But first it’s vital to stop financial bleed—stop taking on more debt!
If you’re out of debt, work with a SmartVestor to determine where and how you should invest money for your future. Once you’ve set a plan in place, you’ll start to breathe easier. Remember, you didn’t get into a financial crisis overnight, so it will take time to get yourself out. Financial resolution won’t happen immediately, but with patience and persistence it will happen.
How can I be ready for unforeseen expenses (like illness, job loss)?
When your debt is paid off, it’s wise to build up your savings before you start thinking about longer term investments and paying off your mortgage. Building a savings cushion to cover you for 4-6 months will protect you from losing your home or facing catastrophic consequences during a disaster, illness or job loss.
If you’ve run into a crisis BEFORE your debt is paid off, work to mitigate the damage as much as possible. This might mean making tough decisions like liquidating assets such as your car and even your home and going back to renting. It also could mean looking for temporary employment or taking on a few side jobs until you get back on your feet.
What will only add to the stress is taking on additional debt, like a short-term high-interest “payday loan.” If a situation arises where you need money immediately, first look to sell any items you own and eliminate any payments you’re making (such as on a car). Discuss your options with your bank or credit union and consider 90-day interest-free lines of credit, provided you have a plan to pay the balance back before interest accrues.
We can’t always predict what life will hand us, but we can prepare as much as possible. With 4-6 month’s salary tucked away in a savings account, you’ll gain great peace of mind, and you’ll have a plan in place to avoid having to make tough choices when life throws you a curve ball.
How do I get a handle on my mortgage? Can I even afford a house?
Many readers face issues with their mortgages. Either a mortgage payment is too high, a home has lost value or they’re working to save up for a down payment on a house.
Owning a home is a great investment, especially if you buy within your means, and look for an affordable mortgage payment. In most cases, with a little work and upkeep, homes increase in value, especially in our current market. A well-maintained home is a great way to protect your money.
That said, many of us buy beyond our means. Rather than opting for a home and mortgage we can afford, we stretch our budget to purchase a home because of the great location, the awesome yard or the number of bedrooms. We go outside of what we’re able to reasonably afford and get into trouble.
When purchasing a home, aim to save up for a 20% down payment and look for a 15-year mortgage with low interest. Housing should comprise about 20-25% of your income. Following these guidelines will keep you from getting into a situation you can’t afford.
If you’re struggling to pay your mortgage, look into refinancing options to reduce payments and consider selling to move to a smaller, more manageable-sized home. It’s far better to live in a “starter home” you can afford than to turn your dream house into a financial nightmare.
I’m worried I won’t have enough money for retirement, where should I begin?
One of the top concerns we heard from readers was not having money saved up for retirement. It’s a nagging concern, especially as we get older and inch closer and closer to the age where working fulltime seems daunting.
If your employer offers a retirement match or pre-tax contribution option, take advantage. Work hard to create room in your budget. Set up the money to be removed right from your paycheck (which is done in most cases) so you don’t even think about the money going toward your retirement.
If you’re self-employed, don’t feel you’ve put enough away for your retirement goals or your company doesn’t offer a retirement benefit, you may need to take matters into your own hands. If you’ve paid off debt, have 4-6 months of your salary saved up for unforeseen circumstances and have narrowed down your monthly payments to simply your mortgage and living expenses, then it’s a great time to start aggressively saving for retirement!
Talk to an expert advisor about how to best put money into a savings vehicle to help you maximize your retirement savings. An IRA is often a good option, but always discuss your options with an advisor who will review your financial layout and help you plan.
How and when should I start saving for my child’s college education?
Many parents want to help their kids save for college. This is one of those situations where it’s important to put on your own oxygen mask before assisting someone else. If you’re struggling with crushing debt or you’re in a state of financial crisis, put the college savings on hold for now. Understand, helping your child do well in school and encouraging them academically is as important as helping them pay for college.
There are many options available to students as well. Not every student needs to attend a top tier private college right away. Plenty of successful students attend cheaper state school for their undergraduate studies, work part-time and apply for scholarships and grants.
If you’re in a place financially where saving for your child’s college is a goal you can comfortably achieve, then look into 529 tax-advantage accounts which are pre-tax options to help you maximize your investment and savings.
Help your kids grasp the importance of college savings by encouraging them to deposit financial gifts they receive into the account as well. Discussing college savings (and finances in general) with your child will help teach them about money and lead to wise financial choices later in life.
Money worries don’t have to keep you up at night! They can definitely stress us out but once there’s a plan of attack in place, we do feel much better.
One thing that doesn’t help financial worries? Putting them off. Many of us ignore financial problems, hoping they’ll just go away. Unfortunately, they don’t and most only get worse over time. So seize the day! Take steps now to get yourself to a place where you can stop stressing about money!