Americans make many mistakes with their money, which may help explain why the financial advisory sector and the debt collection industry are flourishing today.
Money failures are common and almost always self-inflicted, according to a recent survey by DepositAccounts. 85% of Americans have admitted to making financial mistakes over the last 10 years.
Some errors are actually greater than others.
During the same survey, the worst financial mistake of the previous decade was racking up credit card debt (23%), followed by ignoring enough savings for retirement (16%), spending beyond their means (16%), and paying bills late (8%).
Are Americans Financially Illiterate?
Financial experts have their own understanding of money mistakes people make, which are so horrifying, that the negative impacts can last decades.
According to Mark Williams, the chief executive officer of Brokers International in Atlanta, Ga. Money can make money, and most people do not understand how that happens and how to use compounding.
Williams believes that Americans are suffering from financial literacy, and that Uncle Sam is the culprit.
Most people are insecure about being financially proficient because we aren''t particularly focused on today''s school curriculum. We need a grassroots effort to make financial methods more effective for younger adults.
Others claim that too many Americans have a fundamentally misguided outlook on what makes a decent money savings level, another financial gainwreck that can last for years.
Most Americans don''t have to pay enough for their entire lives, according to Grant Sabatier, the co-founder of BankBonus.com. This means they have to pay more for their entire lives.
According to Sabatier, the average savings rate in the United States is about 4%, which unfortunately means most Americans will never be able to retire.
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Most Americans will retire in 25 years or less, according to a report. If you can save 30%, you may retire in 20 years or less. 40%, 15 years or less. The higher your savings rate, the greater your financial independence.
Bouncing Back from Money Mistakes
The good news is that it''s more than possible to recover from money mistakes.
If you are making those mistakes, or better yet, want to avoid making personal finance miscues, Michael J. Garry, a financial planner and author of the book, The Smart Persons Guide to Financial Planning & Investments, has a five-step strategy to adopt.
It''s great to have a look at it.
1. The first thing you need to do is go deeper into your current financial situation, perhaps with the help of a certified financial planner. Everything you need to know about your finances: bank statements, investments, retirement, and all of your debts, according to Garry.
2. Examine your net worth and compare your income to your expenses. Is your situation pleasant with both issues or with one or the other? Is your mistake difficult to overcome or will it be a journey? These questions will give you a better understanding of your financial life.
3. Develop a sustainable household financial management strategy. Depending on the answer to these questions, you will need to develop a long-term financial strategy to get you in better shape with the aim of being able to retire at some point.
4. Find the money and save it. If your income isn''t sufficient to pay your bills and save what you need to, you may increase your income or reduce discretionary spending.
Garry said that most financial planners are focused on cutting expenditure. Personally, I think it depends on the situation and what would best suit you. I worked a second job for years to assist pay down my student loans. Yes, it was fun, but it worked.
5. Assume that your plan is in place, you should periodically check it to make sure it remains the appropriate plan and make adjustments as needed.
Because your situation and goals are likely to change throughout your life, Garry said, it''s common to make adjustments along the way.