According to an AP report last week, some analysts are expecting 2014 to be “the best year for the U.S. economy since the recession ended 4-1/2 years ago.” Pay raises are holding steady at about 3%, and consumer spending last quarter was strong.
But in the midst of this good news, are individuals positioning themselves to be better off financially than they were during the economic downturn? Matt Allgeyer, Financial Planner at Wamhoff Financial Planning & Accounting Services, offers his advice to Elliot Weiler.
1.Live within your means:
- Create a budget and stick to it. Be sure to include all of your expenditures and be committed to tracking it.
- Avoid using credit cards, and if you do, pay them off each month.
- If you get a raise, don’t spend more – but if you do, don’t spend more than your raise!
2.Focus on paying down debt:
- According to the Federal Reserve, total U.S. credit card debt in 2013 was nearly $850 billion, with the average household holding about $7,000 in credit card debt.
- These interest rates are typically high, so focus on paying them down.
- Don’t forget about student loan debt. The average amount of student loans for recent graduates is just over $29,000, according to a report by the Institute for College Access & Success.
- Student loan debt is rising at an average rate of 6% per year from 2008-2012.
- Pay it down while times are good! If this isn’t possible when the economy is growing, there’s a good chance you’re living beyond your means.
3.Increase your retirement savings:
- Has your pay increased? Have you paid down your debt? Then focus on paying yourself!
- Increasing your retirement savings will not only help to secure your future, but will also help to make up some of the lost ground you may have experienced when you stopped contributing due to a job loss or other economic hardship.
- Make sure you’re saving enough for retirement, create a plan, and work that plan consistently to ensure your savings are adequate and balanced properly.
A financial advisor can help you create and execute a plan, and serve as a third party coach when the players, the individual investors, want to splurge. Financial advisors help to focus the efforts towards the purpose and end goals.