By Deborah Reed
WKTV Managing Editor
Financial resolutions are one of the top two resolutions people make at the beginning of each year. Yet 95% of financial resolutions are not met.
Many families have acquired a “debt hangover” as they move out of the holiday season and into the new year. New financial resolutions are made to get their financial situations on track, but rarely met.
This often compounds the problem, adding even more debt.
Dinorah Livingston, Regional Vice President for Primerica Financial Services and Money Mindset Coach, says we need to identify how debt accumulated and then change our mindset to stay on track with financial resolutions.
Identification: Where did the money go?
“Our relationship with money affects how we treat money,” says Livingston.
Livingston went on to say that debt hangover is often created from not living within your means, but is compounded by not preparing properly.
“It’s people not checking and balancing, not planning right, being impulsive – there are just so many things,” says Livingston.
When making purchases such as a home, many people buy with “stars in their eyes.”
“They want the pretty, shiny thing instead of the reality of where they’re at,” says Livingston. “That’s how people end up being house poor and living paycheck to paycheck.”
Those living paycheck to paycheck often have to finance special occasions – such as Christmas – on credit cards. This can take years to pay off.
Wages are also not keeping up with the cost of living.
The median (average) household price in Kent County and Ottawa County and the median household income are not equal.
“Debt hangover is not only an issue every holiday, but because people just don’t make enough money,” Livingston says.
Is there a solution?
Continual financial literacy and financial education are part of the solution.
Though there is a wealth of financial resources and knowledge available, financial education in school systems is lacking.
“Even with so many resources available to us, people have so many things they don’t understand when it comes to financial literacy,” says Livingston. “And because they don’t know, they make mistakes.”
Fixed debt vs. revolving debt, debt stacking and fixed interest rates are some options for paying off debt.
The first step, however, is to put a plan in place. That plan should include an emergency fund, a short-term needs fund and a long-term needs fund.
“Getting rid of the debt is important, but what’s also important is making sure that you’re consistently filling your emergency fund,” says Livingston. “It’s not a matter of if you’re going to have a financial issue, it’s a matter of when.”
At times, multiple sources of income – even for the short term – might be needed.
Patience will also be needed since results are not instant. Instead, those results build into a compound effect.
“Many people get so narrow-focused that the only thing they can focus on is debt,” says Livingston. “What you focus on grows.”
Budget = Freedom
“Some people think budgets put handcuffs on them,” says Livingston. “It doesn’t put handcuffs on you, it helps you understand where the money is coming from and where the money is going.”
For 19 years, Livingston lived paycheck to paycheck. She finally decided to track her spending to understand where the money was going.
“Once I understood the pattern of how spending was happening in my household, I realized I was the problem,” said Livingston. “And I was the solution.
“In nine months, I had shifted my spending and it allowed me to buy brand-new furniture for cash. I now controlled my money instead of my money controlling me, and it gave me freedom.”
Don’t give up…break it down
“Sometimes you might feel like you want to just give up,” says Livingston. “But you can make it happen.”
Livingston admits that changing mindsets may be hard work, but taking big dreams and breaking them down into smaller pieces can help.
“It’s not about perfection,” says Livingston. “All you need to do is focus on your progress; it’s really about progress.”
How do we focus on progress?
“You can’t change everything all at once, so pick a max of three things that you’re working on and track them,” says Livingston.
Why do we need to track progress?
“We need to track our progress because our mind plays tricks on us,” Livingston says. “Especially at the end of the day, we want to give up.”
Livingston suggests tracking those three things for 90 days, remembering that – if you fall off the wagon – it’s not about perfection, it’s about the progress that you are making toward your goals. Progress is found in each small step.
Gratitude = Less Debt??
Tracking the things you are grateful for is also important.
“I have a journal that I write in. Every day I write three things that I’m grateful for,” says Livingston. “Sometimes they’re financially related, sometimes they’re not.
“But when you’re focused on what you are grateful for, believe it or not, you spend less money.”
An outside perspective
For those unsure of what to track or where to begin, partnering with a financial advisor can help.
“Sometimes it takes an outside eye to take a look at what you’re doing, and point out those things that you’re missing,” says Livingston. “When we’re so close to it, we can miss it.”
Living debt free
“It doesn’t matter if people have $10,000 of credit card debt or $100,000, they can be debt free – if they don’t accumulate anymore debt – in less than four years,” says Livingston.
It starts with a budget, then an emergency fund, a plan and sticking to the plan.
Above all, Livingston says, remember: “You’re the boss of your money.”
For more information on Primerica’s financial services, click here.
