What's the one mistake most people make that hurts their saving plans?
One of the best ways for consumers to ensure a strong financial situation going forward is to make sure they're setting enough money aside to put into savings each month. That can help to ensure that when unexpected financial problems arise, they don't have to worry about where the money to cover them will come from. And often, the reason they get derailed from such goals is a simple one.
The fact of the matter is that even some rather wealthy people will often overspend on frivolities, according to a report from the financial news site MarketWatch. Studies show that "lifestyle purchases" such as spending on entertainment, going out to dinner, buying clothes they don't necessarily need, and so on, are a major driver of financial difficulties. Indeed, nearly half of people who make more than $75,000 annually polled in a recent survey say that these purchases alone end up hurting the savings efforts they know they should be pursuing with greater intent.
What does that mean for those making less?
Meanwhile, many Americans don't make anywhere near that amount - the median household income a few years ago was just $50,000 annually - and yet still spend on restaurants, nights out, and so on instead of doing more to conserve their money. And that can do a lot to impede not only financial success through savings, but also lead to more debt that can further add to their difficulties down the road.
The fact of the matter is that these purchases, regardless of what they are, significantly eat into take-home pay in ways that many people might not consider. That's because every $50 or $100 they spend on a family meal at a restaurant, for instance, is money they could have put into savings, or toward reducing outstanding balances. Even if they're making contributions to those accounts on an ongoing basis, the extra money in the coffers or reduced from debt never hurt anyone.
What can they do instead?
The reason it's such a good idea to put a little extra walking around money toward credit card debt in particular is that any cash contributed to a balance above and beyond the listed minimum directly reduces the principal balance rather than interest accrued. That, in turn, means debt will grow more slowly going forward, especially if spending on those accounts is reduced or discontinued entirely. That should not only build financial stability in the future, but also improve credit standing.