In a bleak economy that has split the “middle class” into three different subclasses, the 18 to 29 age group have more opportunities to go into debt than any generation that came before them. There is a lot of pressure to show success. So much so that more people are living beyond their means more than ever.
Unfortunately, these people are the perfect prey for cash advances, payday loans, and high-interest credit cards. As the number of people in financial denial increases, so too do services like Dave that make it too easy to get cash advances every week or two. Even if they don’t charge “interest,” the finance charges are definitely predatory.
So what is financial denial really?
In addition to the cash advances mentioned above, there are several signs that you are in financial denial.
- Putting off checking your bank balance
- Pretending the debts on your credit report don’t exist
- Avoiding looking at your credit report or checking your credit score
- Constantly seeking loans (from banks or friends and family)
- Failing to stick to a budget, spending too much money on entertainment
Are you in financial denial? No matter what shape your finances are in right now, you have the power to start making changes right away. Here are the best ways to bounce back from financial distress, reduce anxiety and depression from finances, and start building a better future.
Cut the credit
Especially now that we use cards for almost every purchase, it is easier than ever to live off of credit cards. Young people, and people with bad credit, get a lot of offers for credit cards or cash advance loans.
Having that card in your pocket gives you a false sense of what you can reasonably afford. Stop the cycle of loans and high finance charges, cut up the credit cards with the highest interest rates, and keep the card somewhere other than your normal wallet.
Develop a monthly budget
This is easier than you might think. There are phone apps for both iOS and Android that make budgeting, managing, and tracking your spending that work with almost any bank. There are also apps for Windows and Mac, with some web apps allowing free personal use. If you prefer to use your PC, Word, Excel, the Microsoft Office site, and other sites all over the web offer budget templates, and you should be able to find one that works for you.
Save first, spend later
Keep this mantra in mind as you develop your budget. Take a certain percentage of your net income right off the top, and sock it away in savings. It doesn’t have to be a large amount to start with, especially if you are already living paycheck to paycheck. Start with even just 5 percent and increase it bit by bit as you free up funds elsewhere.
After savings and buying the necessities of life, you can budget how you will spend the rest of the money. You should pay money toward debts as you are able.
Pay bills manually
Autopay is convenient if you don’t want to have to remember when your bills are due. But being able to pay them manually is highly beneficial when you are trying to get your finances under control. Taking everything off of autopay will also help you prioritize which items you can get rid of completely, or areas where a decrease in budget would be easy to do.
Set an end of the year financial goal
More than a New Year’s resolution, a financial goal is specific, measurable, achievable, relevant, and time-based. This is the recipe for SMART goals that most people in the workforce or educational system are familiar with. What do you want to be able to do next year? Do you want to move? Take a vacation? Install solar panels?
You should also consider how you will meet that financial goal. For example, determine a reasonable amount that you can pay in addition to scheduled loan payments.
Of course, to create a financial goal, build new spending and budgeting habits, and change your lifestyle successfully, you must first admit that a problem exists. End the financial denial, get a copy of your credit report, and truly assess your finances.