In today’s “Money Mondays” segment, Mellody Hobson discusses spring finances.
What do you have on tap for us this morning?
In the spirit of spring, we are going to talk about some financial mistakes many Americans make every year, and how they can start out fresh this year. Hopefully we can move the needle a bit so that by this time next year no one looks like a financial April fool!
Nobody wants to look like a fool! Where do we start?
The first thing: know where you stand financially. Many people simply do not know enough about their own financial state which prevents them from knowing what changes need to be made. Take credit scores: nearly half of all Americans do not know what their credit score is, tom. Even more surprising, nearly a quarter of Americans – 22% – have never checked their credit score.
Beyond this, people are just not sure of how credit ratings work, or what rights they have in relation to their credit. For example, 38% of credit card users and 40% of mortgage customers didn’t know that credit card firms and mortgage lenders use credit scores to make lending decisions. over a quarter (26%) of U.S. consumers don’t know that keeping credit card balances low improves credit scores. and just over a third (35%) of Americans don’t know that lenders are required to tell them if a request for credit has been turned down, and what credit score determinations were used in the decision.
These number show how little people understand about the importance of their credit scores are, and what goes into calculating them. And without this knowledge, it’s very difficult to improve your credit. So if you don’t already know your score, or what goes into it, go check it out now!
That is good to know! What’s the next foolish financial decision?
This second piece also has to do with knowing where you stand. Not having a budget, and not knowing where your money is going, can cause big headaches. Without knowing what you are spending money on, it is hard to make good financial choices, and therefore it is easy to waste money without even knowing it. And let me tell you, Americans unnecessarily spend a lot of money each year because they aren’t seeing the full picture.
Take credit cards. Currently, the average credit card debt per U.S. household is $15,270, and in total, Americans owe $856.9 billion in credit card debt, based on American household credit card debt statistics as of January 2014. The 39% of Americans who carry credit card debt from month to month are paying millions of dollars a year in credit card interest. That is money that could be going to retirement or savings!
Not convinced that interest alone is capturing a lot of your hard earned cash? Perhaps look at your food bill! According to the national resources defense council, Americans waste $165 billion annually by tossing away unwanted snacks and or groceries they do not use. The math works out to approximately $529 per person each year!
Finally let’s look at energy. Business insider estimates that Americans throw away $443 billion on wasted energy, and government-supported energy star says consumers could cut energy costs by a third if they used the recommendations and suggestions on their to-do list.
Not having a budget and not knowing your spending habits means that you are not able to identify where you can save and where you are hitting your mark! So next time you have a few minutes, consider sitting down and figuring out where you spend your money.
Anything else we should know?
There is one last thing on my list of fresh starts today, and that is the go-it-alone approach that many people take when it comes to money. with all of the information out there, and the little time that we have every day to process it all, not asking for help with your financial decisions can end up costing you.
Investing is a great example. Individual investors under performed every major asset class over the past twenty years, including inflation! it is much better to work with a financial advisor who works with investments for a living rather than doing it yourself and going with your gut.
Another example is taxes. Americans who do their own taxes leave more than $1 billion dollars on the table every year simply because they do not know what they can deduct or write off.
Sometimes, it pays to work with a professional who can help you with money matters that you just don’t fully understand! so my message is, do not be afraid to ask for some professional help when it comes to your hard-earned money.
Money Mondays: Take A Fresh Look At Your Finances This Spring was originally published on blackamericaweb.com