The government is making changes in the market. It is coming together at the direction of President Obama, who is trying to spur on economic reforms that will protect Americans. During the recession, many things were revealed about the questionable practices of lenders, and now that they are out in the open, things are being done to regulate them. But how effective will the changes be? Many experts are warning that though there will be safeguards and watchdogs, it is still up to consumers to watch their own financial growth carefully.
How to manage finances wisely
So what does “watching finances” mean? For the most part watching finances means acting wisely and not relying on credit cards or lenders for financial sustenance. Here are some tips to follow when managing finances:
- Budgets. It has long been heralded the primary way to manage finances. Knowing how much money is coming in and how much is going out is integral to making a rock-solid financial plan. A lot of the problems of the past were birthed from consumers not knowing their financial situation and expecting credit to compensate. Now that compensating with credit isn’t as beneficial as it once was, it’s important for consumers to take their budgets into their own hands.
- Emergency funds. A recent study showed that just 49% of people surveyed have 3-month’s worth of expenses stashed away. Prior to the recession the “3-month rule” was touted by experts; after the recession, they are now stating that 6 to 9 month’s worth of expenses are more realistic. Regardless, people need to start squirreling away money for an emergency fund because when times are difficult, credit lenders wil close their doors and cash is the only thing left to rely on.
- Managing revolving credit balances. Revolving credit costs. Sure it may be convenient to not use savings for purchases, but the overall cost to store it away on a credit card is a hefty one. Credit lenders are still charging anywhere from 14 to 29% in interest, and that considerably increases costs of purchases. Any savings can quickly be gone if consumers insist on holding a revolving credit balance. The best thing to do is pay it off immediately, or as soon as possible. It is the only way to effectively manage credit.
- Saving for future high-costs. There are a number of high-costs involved in a life these days. That includes retirement, education, house purchases or automobile purchases. Each one comes with its own set of rules and consumers need to be aware of them. For example, when it comes to retirement, a recent survey showed that 50% of consumers had a retirement plan through their employer and only 28% of the other half had another form of retirement savings set up. That means, at minimum, there are about 20% of Americans who still don’t have a reasonable financial plan for retirement. It’s this kind of financial ignorance that is going to continue getting people in trouble when the market fluctuates and credit declines.
Building positive financial futures
Overall, positive changes are on the way into the market. That’s great news for any consumer, but it isn’t the whole financial picture. Consumers need to be more vigilant than ever about money, and that means watching purchases and money drains. It requires effort, but the end result will be a much more stable financial future that isn’t dependent on credit lenders or market fluctuations.
