Have you looked at your savings recently? Americans of all ages are hopelessly behind the curve when it comes to handling their money responsibly, especially young people. Unless they have astute parents, young people are at a high risk of making financial mistakes that lead to chronic debt.
Household debt, according to the Federal Reserve, reached a record $13.21 trillion in the first quarter of this year. Debt is now 18 percent higher than it was in the second quarter just five years ago. Imagine how all that debt affects the life of the average debtor. What will happen if you lose your job?
With unsecured consumer debt, you are beholden to the creditor because each day that the debt remains unpaid, interest charges pile up. Over time, unchecked use of credit can erode wealth.
On the other hand, financial success is usually the result of years of self-control. A big part of that discipline involves living within or below your means. Work to keep your overhead — what you spend every week — lower than your weekly income. Pocket the difference and don’t let every bump in income mean a boost in lifestyle.
It’s easy to access some of the trappings of wealth in our society, but it’s difficult to actually afford them. Don’t confuse easy access to credit with real wealth. Buying new cars, big houses and designer handbags might impress others, but these goods often mask high debt and a precarious relationship with credit.
It’s not sexy, but real wealth is usually the product of responsible spending and maximizing the value of every dollar.
So how do you accomplish financial success? Learn to save aggressively early and you won’t have to save so much overall. Saving is a long-term proposition. No matter how modest the amount, starting the savings habit early pays off. You benefit from compounding interest, you experience upswings in the market, and if long term savings is your goal you can recover from downturns in the market.
Now, looking to popular culture for cues on how to manage your money is a bad idea. Avoid get-rich-quick schemes. Tune out people who tell you that purchasing the nicest clothes and hottest stocks will make you rich and happy.
Instead, read financial websites that are easy to understand and and learn from the mistakes and experience of others. To rise above the financial clutter, become a student of personal finance. It’s not that difficult.