What Are Your Financial Headwinds?

by Hank Coleman

Headwinds can help us take off.We all have had some trying times with our finances at one time or another in our lives. Like a headwind with an airplane, these financial problems push against us and try to keep us from reaching our financial goals.

Here are three of the biggest financial headwinds that you may be facing.

Financial Headwind #1: Credit Card Debt

Credit card debt is holding more people back from accomplishing their dreams than almost any other thing. When times are tough, we tend to fall back on credit cards as a safety net. Credit card debt sucks the disposable income out of our budgets and robs us of completing our financial goals or doing fun things such as saving for vacations or new furniture for our homes.

There are now over 180 million credit card holders in the United States, and the average consumer has almost three credit cards to his or her name. With the stock market struggling recently, paying off your credit card debt is a way to return a guaranteed rate of return that is equal to your credit card’s interest rate.

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Financial Headwind #2: Spend More Than We Earn

Far too many people spend more money than they earn. Many do not even realize it because they do not have a written budget. Dave Ramsey, radio host and debt reduction guru who wrote The Total Money Makeover, recommends that you should have a monthly budget written on paper that spells out exactly where each and every dollar you earn has a job.

Before you earn your income each month, you should designate where each dollar is going to be spent. All too often when you do not have a monthly written budget and consistently overspend, that is when you will find yourself falling back into the credit card trap.

If you need help getting started with making your budget, check out the great article on ChristianPF on how to make a budget.

Financial Headwind #3: Not Having An Emergency Fund

Even with the turbulence of the record unemployment in America and the shakiness of the stock markets, far too many people do not have an adequate emergency fund to protect themselves and their families.

One Monster.com poll found that 50% of the people who responded did not have a more than one month of living expenses saved in an emergency fund. An incredibly scary 34% of the poll’s respondents had only one week or less living expenses available to them if they had an emergency.

Most financial planners recommend having between three to six months worth of living expenses saved, liquid, and available should you have an emergency. The current recession has even shown that those who thought that they would be safe from layoffs or budget shortfalls are even very vulnerable.

For example, with the budget debates in Washington this past year, many military and federal government workers, whose paychecks are traditionally very safe, saw a threat of the government missing making its payroll because of the budget impasses and in Congress. Even the safest of jobs with a lot of job security need a strong emergency fund.

Airplanes Take Off Into The Wind

Airplanes take off into the wind which gives them more lift. I mention this because, like an airplane, our finances can take off facing into the wind as well. It is through adversity that we become better people and ultimately handle our finances better too.

Like an addict, admitting that you have a problem with your finances is often the first step to recovery. Are you supplementing your overspending with credit cards? Are you running without an emergency fund?

Acknowledging these issues, or headwinds, can be the push you need to help you turn things around and start to get your finances in order.

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About Hank Coleman

Hank Coleman is the founder of Money Q&A, an Iraq combat veteran, a Dr. Pepper addict, and a self-proclaimed investing junkie. He has written extensively for many nationally known financial websites and publications. Hank holds a Master’s Degree in Finance and a graduate certificate in personal financial planning. Email him directly at Hank[at]MoneyQandA.com.

Hank Coleman has written 592 articles on Money Q&A. Learn more about Money Q&A on Twitter @MoneyQandA and @HankColeman.

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