By David Flores
GreenPath Manager and Counselor
As summer gets underway and we have the July 4th holiday in our sights, we feel it's an appropriate time to discuss some potentially dangerous personal finance fireworks you might encounter this time of year.
Debt-hiding smoke bombs, bad-habit sparklers, balance-jumping bottle rockets and fast-spending firecrackers are just a few of the fireworks you might come across this Independence Day holiday. Let's review:
Bad-habit sparklers – Growing up, we were warned to hold a sparkler at arm’s length, maybe twirl it around a bit, and it went out shortly thereafter. The same can be said of our personal finance habits that started out so strong at the beginning of the year.
You may have kicked off 2014 with a solid budget and plan, but, by the beginning of summer, new habits may be fading.
It’s important to revisit those initial feelings of taking control of your personal finances and re-dedicate yourself to good, solid spending and savings habits during the rest of 2014.
An example is to start saving $10 a week now towards holiday gifts, which will lessen the impact on your budget towards the end of the year (that's nearly $250 you'll have in cash, come mid-December).
Debt-hiding smoke bombs – Colorful smoke bombs can make an impact, but a personal finance smoke bomb between individuals can hide problems. Many times, people feel that if they can create a diversion, they can push off painful conversations about spending habits and debt. But, once the air clears, the problem is still there. A good start in communicating is building a personal budget together.
Fast-spending firecrackers - Some people light a long string of fireworks, one at a time, savoring each moment. Others set off the entire string at once to watch it explode into a continuous series of loud pops and bangs. Your monthly income is similar: Spend only what you need, pay your bills, and conserve your money to last the entire month, or spend your paycheck in a short period of time, with very little remaining for the rest of the month.
Keeping credit card balances paid off, while staying current on your bills and building an emergency cash fund is the best option.
Balance-jumping bottle rockets – Light these fireworks and they whoosh out of sight. Some people think that the best way to keep their debt out of sight is to jump the balance from one credit card to another. You aren’t really solving your problem when you continually move your balance from one card to another card.
While you may have good feelings at first that you are paying a lower, or even zero interest rate, that feeling could be short lived. When that introductory rate ends, you might be in even more debt than if you tackled the debt in the first place.
This summer, work on being disciplined with spending and saving and you’ll have more fun in the long run!