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Making your money work for you

Posted by Dress for Success Midwest Professional Women's Group on September 20, 2010

Michael Ravenscraft, MS, CPA
Financial Education Specialist

Since the economy began its downward spiral a few years ago, the trend of American over borrowing and overspending started to become less popular. As a result, many Americans have been paying down debt and saving more, reflecting more conservative attitudes toward managing personal and family budgets in general.

Here are some observations on how this shift from overspending to reducing debt has affected us:

· For some, this shift from overspending to debt reduction has been uncomfortable, but it has also served as a much-needed wake-up call. This change in economic trends and consumer behavior provides the opportunity to increase savings for longer-term financial goals, such as retirement, home ownership, or education, which were often previously neglected, or put off until tomorrow.

· Increasing savings and reducing debt are important steps to improving your personal financial situation. The feeling of financial security that comes with low debt and adequate emergency and retirement savings is a hard-earned accomplishment to be proud of, not simply a sacrifice of lost consumption. Achievement of these goals is the result of your decision to invest in the financial security of yourself and your family. Teach these healthy habits to future generations. It is the path toward accomplishing your most cherished long-term financial goals.
Don’t always view cutting back as a sacrifice; it simply means looking for value in your spending. Who doesn’t love getting a great deal and making the most of their hard-earned dollar? You can increase savings and reduce debt while enjoying the things you value most. Adjust your spending habits to maximize spending on
high-value items and savings, while cutting expenses on low-value consumer goods (the things that cost money, but don’t provide you with a long-term

We have already begun to see this trend by observing a dramatic decline in consumer spending throughout the past few years, accompanied by a drop in consumer credit. Individuals and families are cutting back to live within their means, and they have increased their awareness of how to wisely use credit. Just because you have access to credit or cash on hand does not mean you should spend.

Establishing habits of spending only on necessities and high-value items, while also saving and reducing debt, puts you on the path to long-term financial success, builds a financial safety net for unexpected bumps in the road, costs less in the form of saved interest expense, and increases your chances of accumulating enough retirement savings to be comfortable. In the long run, the assets you set aside and save will be there when you need them. This puts you in a much stronger financial position than spending on day-to-day, low-value consumer items.


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