Talk to a debt counselor toll free:800-300-9550
Our Clients Rate Us Excellent
Based on 3234 reviewsTrustPilot Reviews
We can also blame the banks because they don't educate us on the dangers of borrowing money. In fact, they encourage it because that's how they make their money. You can read article after article that if you borrow $5000 on a credit card and make only the minimum payments it will take you like 20 years to pay off the $5000 but that doesn't stop most of us from making just those minimum payments. In addition, we will collectively borrow more this year than ever before despite all the education and information available regarding how dangerous it is to borrow money. What this translates into is that being educated about the dangers of borrowing money doesn't prevent us from doing it.
An alarming statistic
Our Federal Reserve recently surveyed 5000-plus people. The purpose of the study was to determine if their financial situation was improving along with our economy. While the survey revealed that most households had seen a mild improvement in their finances about 46% of them reported that they didn't have enough money to pay for a $400 emergency. If they were hit with this expense they said they would have to put it on credit card and then pay back the money over time.
This is yet another example of where education isn't the answer to financial success. There have been literally countless articles stressing the importance of having an emergency fund the equivalent of six months' living expenses. The median income for American families last year was $53,657. If we assume this family’s one months' living expense is $1788 (50% of net take home pay) this means it would need an emergency fund of $10,731.
Would you like to guess how many people have an emergency fund that size keeping in mind that nearly half of the people surveyed by the Federal Reserve couldn't cover a $400 emergency expense?
The net/net of financial success
This means the real question isn't why don't we have more information available about personal finances. The question is why are we not motivated to do what we know we should be doing? Of course, there is no single answer to this. Some people are not motivated to save money but to spend it to emulate the lifestyles of people they admire – to eat at the right restaurants, drive the right cars and wear the right clothes. Advertising and the media is what robs some people of the motivation to do things the right way because it has created a new consumerism. When you move into a house with a 50s kitchen your key motivation is probably to redo it because granite countertops are the new standard. Don't you feel you must have the latest smart phone, an automobile with built-in Wi-Fi or a 50 inch, 4K HDTV? The fact is that this new consumerism is what motivates many people and not cutting their spending, living on a budget and saving more money, which is what should be motivating us.
Finally, if you are like most Americans and have trouble saving money watch the following video with its five tips for saving more out of your salary.