The Psychology of Money: Hacks to Help You Save
Findings from a 2010 Pew Research Survey show that 70 percent of Americans have a financial problem. The problems include losing a job, having problems paying rent or a mortgage, having a credit card application denied or having trouble paying for unexpected expenses. It’s not easy to get all of your ducks in a row when it comes to your finances, but these helpful hacks can help.
Rainy Day Funds
Expenses are unpredictable. This is why having a stash of cash in a rainy day fund is a good idea. Unpredictable bills like car maintenance, home repairs, unexpected travel expenses, medical bills and vet bills can have you reaching for your credit card, driving you deeper into debt. If you’re afraid that you’ll act on impulse and make a big purchase with money in your checking account, open up a savings account. This way your money earns interest and you won’t have the temptation to spend.
According to the money experts from the financial website Afford Anything, the mini-retirement model, which was popularized by author and public speaker Timothy Ferris, is catching on in today’s workforce. The model is simple. Instead of working until you’re 65 for a typical retirement plan, the mini-retirement model allows for people to take mini-retirements through different stages of life. Some choose to work for two years and save a large sum of money to support a few years of travel while others opt to work for shorter periods of time, like two months, then take a month off from work. Although this is an alternative method of saving and spending money, it is wise to continue planning for your later years after you exit the workforce. The standard savings should total 10 to 15 percent of your income.
America has a culture of consumption. At one point or another, you’re going to make a rash purchase decision, and that’s just fine. However, according to the experts from Psychology Today, some people possess a trait called impulse buying tendency. This personality trait means that the person has a habit of making impulse buying decisions. Most people with this trait are image-concerned and status-conscious, thinking that they always have to look good in the eyes of others. These types of people also have a hard time controlling their emotions and resisting spending money. Oftentimes people with this personality trait make purchases to feel happiness and are not likely to consider the consequences of their spending.
If you find yourself acting on impulse, ask yourself, “Did I plan to buy this item?” or “Do I need this item?” For example, new technology and gadgets can be tempting. While you may need to update your smartphone to something like the HTC One M9 to stay current with your job, family and social following, the Fitbit you used for a week probably ended up being a waste of money. Before buying these types of products, be sure to ask yourself what your needs actually are and if that device fills that need.
The Federal Trade Commission (FTC) cites that many people face a financial crisis at some point in their lifetime. From overspending to the loss of a job to a family illness, unexpected events can send your finances into a frenzy. If you’re experiencing a financial crisis, the FTC recommends working with a debt relief service, such as a credit counselor. There’s no one-size-fits-all solution, but disciplined and realistic budgeting can help you get your finances back on track. Online credit tools, like Credit Karma, help you monitor your credit score and offers helpful information about resolving credit card debt.