The New Year is here. After spending in December, indulging your appetite for food, drink and shopping, you’re hit with the bill. All the resolutions in the world can’t change the past. It may be time to have a frank discussion about making changes to your financial health. In other words, it may be time for a hard conversation about budgeting.
“Talking about budgeting is like talking about losing weight,” says Darren Devine, President of Devine and Associates Financial Services Inc. “People know they have to do it, but they never want to do it. What it comes down to is the simple concept of dollars in and dollars out. How much money is coming in your front door, and how much is going out the back door? Whatever’s left, we want to see that grow.”
It’s not just holiday spending that can lead to accumulating debt. There are many reasons why people wind up in financial crisis in January. According to Devine, easy credit purchasing throughout the year is a big reason people get buried in debt.
“Let’s say you’re going to buy a $1,000 sofa at one of the ‘Don’t pay for a year’ retailers,” he said. “You can walk it out of the showroom and not pay for a year. But at the end of the year, your payments often start with 25% interest. Now that $1,000 couch costs $1,250. Quite often people wind up making only minimum payments. When I analyze these arrangements, sometimes I see a thousand-dollar couch costing someone double. If this couch had a $2,000 price tag in the showroom, would you still buy it? The answer is an obvious ‘no’.”
According to Devine, January is always a good time to start thinking about your financial health. “Your financial health plays into your physical health,” says Devine. “If you’re underwater, drowning in debt, spending more than you earn, struggling to pay your bills, it all piles up in your brain. That’s an unhealthy and stressful situation to be in day in and day out.”
Devine says the first step toward financial recovery is living within your means.
“Here’s a simple one-liner from my grandmother,” said Devine. “We hope for the best, but plan for the worst. It’s a matter of trying to have a healthy, common-sense balance to your finances. If you spend like tomorrow’s never going to come and it shows up, you’re in trouble. That’s why budgeting is so important.”
Another suggestion to eliminating unnecessary debt is avoiding purchases based on emotion or desire rather than simple necessity.
“Emotional shopping can make you feel better in the moment because you satisfied a want,” says Devine. “But what can happen is it can build resent. Suddenly the reality of 60 payments for that snowmobile in the garage kicks in, and your job says they have to lay you off due to COVID. You’ve got the reality of luxury payments without the income. We don’t want people to live a shut-in lifestyle of work, sleep, work, sleep, die. But people who have built substantial wealth tend to buy things that appreciate. Cars, snowmobiles–these things don’t appreciate. You don’t want to be on the opposite side of spending more than you’ve earned.”
Ready to deal with your debt and start planning for your financial future? Contact Devine & Associates Financial Services Inc. at 519-780-1730.
