In the first quarter of 2016, American consumers paid down over $27 billion in consumer credit card debt, according to the Federal Reserve Board. That may sound really impressive to you, but it’s not. $71 billion was spent in the first quarter on credit cards. The payment of $27 billion was the lowest one quarter payment on credit card debt in any quarter since 2008. Americans currently have on the books over $3.6 trillion in credit card debt and that number is rising. Consumer debt in total today is at an all-time high.
So why has it become so much harder to save money and control your consumer debt? And how can you stop your consumer debt and learn how to save more money?
Fixed Expenses Vs. Discretionary Spending
When you wonder why you just can’t seem to get ahead with your money and make ends meet, you may think it is the volume of your discretionary spending. It very well might be that and what you just don’t think of as well. That is the growing amount of your so called “fixed expenses” that may be making your effective money management efforts a failure. Choosing to cut your discretionary spending to prevent your credit card debt from climbing sounds like the solution, but is it?
When I look at my own expenses, I see that my discretionary spending seems to be a very small percentage of my total expenses. When I count in my mortgage and interest, condo association fees, real estate taxes, utilities, car and all the rest of the “fixed expenses”, the actual controllable amount of my money seems to shrink every year no matter what I try to do. So why can’t I or you really get ahead of the curve?
The reality is this: spending and the use of credit aren’t just about discretionary choices and purchases. What we choose for our necessities and fixed expenses has a lot to do with it. We have been compromised by several factors which many of us are unaware of or try to ignore. I have been guilty about it myself. I’ve come up with several reasons why it’s so easy for us to spend and so hard for us to save our money for you to consider.
We just have too many choices
As an example, there was a time not that long ago when we had simple choices to make in our lives and in our spending. We had a TV and once we purchased it we simply attached the rabbit ears or installed an antenna and there it was operating for our daily family entertainment. No monthly expense.
Today, that basic expense has morphed into a multihreaded monster that has become a fixed expense like no other fixed expense was ever before. There’s cable, or satellite, or some other form of TV package (Netflix, Hulu, Sling, etc.) that eats into our budget each month with hundreds of channels and choices. Tack on the phone and internet and subscription bundle for music, sports and movies and you can easily see that we are loading up on “family entertainment” to the point of the ridiculous and sublime. I’m guilty here as probably you are. In fact, my fixed expense is over $140 a month and that’s with only one TV, and a phone and internet package. It’s a fixed expense, right?
The point is that even with fixed expenses such as housing and transportation, we have choices. Do you live in a one room apartment or a McMansion? Do we drive a used compact car or a brand new gas-guzzling monstrosity?
What you can do: Simplify and downsize. You don’t need to choose the biggest and brightest option in every expense category. And remember, picking nothing is a choice when it’s not an absolute necessity. Determine what you really need and stick to that. If you find you’re getting “decision fatigue”, stick to a routine, whether it be what you wear or what you eat, and save your decision-making skills for when they’re important.
We have too much on our plate
Today we have work, food shopping, the kids have soccer practice and dance class, then there’s little Billy’s 7th birthday party and the garden needs to be weeded and so on and so on. The issue here is that most of us face a really busy and hectic schedule every day just trying to maintain a job and family and life in the 21st century. That didn’t really exist in past generations. In the past, you might say things were slower and maybe boring and you’d be somewhat right. But the thing is that despite it being simpler, it was also a time when it was just easier and more controllable in ways that don’t exist today.
You had mom at home taking care of the kids and the shopping and the meals, etc. and that was more than enough time for getting things done. That still left the time to think, plan, and control the family finances with dad. I’m not talking about ancient history here. I grew up with that kind of scenario and that was the 20th century! Time for thinking, planning and controlling your money today is scarce and at a premium.
What you can do: Divide jobs with a partner and delegate responsibilities to older children if you have them. Set up your finances so they’re easy to track…I use Quicken but there are plenty of options out there. Then set aside a few minutes to go over finances every week or so. It doesn’t have to be long just 15 minutes will let you review your budget and where you stand.
We have too much media
There’s a bombardment of influences that we see, hear, and read every day that makes us believe we simply must have the “must haves” of our world. Whether it is the latest sneakers for the kids, or clothes from the “right” store or that car that is voted the best in the market. It’s a never ending stream of things that we feel compelled to provide for our families and if we can’t pay cash, we’ll just charge it. It’s just so easy to be influenced to do those things, we seem to fall right into that trap whether we care to admit that or not.
What you can do: Don’t watch the commercials…either fast forward or take a few minutes to exercise or take a walk. Limit your media viewing and that of your children, who are even more likely to be influenced by what they see and hear. And before you make that purchase, ask yourself is it really something you need or is it something you think you’re supposed to have.
Spending is just more fun than saving
Let’s just tell the truth here. It feels so much better to buy things for you and your family than it does to be frugal and say no to that kind of thing. Billy wants a new baseball glove and Jennifer wants an iPad. You want them to have those things. After all, all the other kids have them and your kids will feel like some kind of loser if they don’t have them. Keeping up with the Joneses isn’t new, just more expensive than ever! The real question is that if you keep up with them, can you afford to pay for those things and still fulfill your other obligations in life, like saving for ________ (yes, that laundry list of college, retirement, emergencies, etc.)?
Saving money is a lot like losing weight or exercising to be fit. It’s necessary but it’s not really much fun. But just like losing weight and exercising, it’s something you must make a daily habit for it to be successful.
What you can do: Set long term goals and keep them visible. Don’t let short term “retail therapy” divert you from those goals. Reward yourself for making progress and achieving those goals. Finally, make frugality a game to see how much money you can save.
There is so much information here and across the internet to help you learn to be in control of your money and to prevent debt from ruining your life. On the other side, there’s an army of consumer temptations including debt, misuse of credit, and spending too much on what’s fun and exciting. You are the only one that has control, or lack thereof, of your money and your life.
What are you doing to prevent debt from running your life? What changes have you made to your “fixed income” and discretionary spending habits to fight in the war on debt? Are you teaching your children to be responsible with their money?