Behaviors repeated over and over become habits. When it comes to personal finance, many of our behaviors have created unhealthy habits that can lead to financial destruction. Whether it is in our own lives or in the lives of people we love and care about (i.e, children, siblings or parents) each of us has witnessed the devastating effects of over-spending, over-leveraging, and living beyond our means. Prepare your food at home more often. Eat out less often.
The typical family’s largest monthly obligation is their house payment. Today many families have become “House Poor.” This is a situation where the house payment consumes a dangerously high percentage of the household income leaving too little money left to support the family after the house obligation is met. For many other families the amount of consumer debt payments is the culprit for cash flow challenges. Both of these situations tend to cause tremendous anxiety and pain within a family. All too often the results are financial and/or relational destruction.
The first step for people in challenging financial situations is to review the habits that have led up to their current situation. Is there unnecessary spending that has developed into bad habits? Maybe there are small luxuries that can be satisfied in a more cost effective way, or given up entirely. People often discover that eating at home more often, making their own beverages or purchasing less expensive versions of products can save the money needed to live more comfortably.
Once a thorough review of monthly spending has been completed, it is time to review how the debts are structured. Often times, a simple reallocation of debt will reduce the monthly outflow to a more comfortable level. If the budget is still too tight, then it is time to consider items that can be sold or downgraded. This may be a car, boat, or more significantly a home. Given the thousands of homeowners with mortgage payments that will increase as interest rates rise, this will be the best solution for many.
As people go through the process of re-establishing financial habits, it is important to remember that the experience will be emotional. It is difficult to downgrade a lifestyle and/or give up indulgences that have been a part of everyday life. The key is to remember that the joy of feeling financially in control will significantly outweigh the pain of what will be sacrificed.
If you or someone you know is in a situation where the monthly budget has become uncomfortable, perhaps it is time for a no cost, no obligation financial “check-up”. As part of our “Wealth Care” plan my team and I help hundreds of families each year to gain control of their financial habits and re-establish new ones. As part of the process we will evaluate your cash reserves, debt, long-term savings, and equity and make recommendations on ways to improve your situation. If you are comfortable with your budget but you would like to make sure you are getting the best interest rate possible on your mortgage, call 801-501-7950 or e-mail me to see how you can benefit from the unique mortgageexperience provided by my team. We look forward to welcoming you into the City Creek Family, your Wealth Care provider for life.