Everyday the news is full of stories about how bad the economy is and that it will most likely get worse before getting better.
“Families are getting hit hard on the basics like gas and food,” said Debbie Brown, Vice-President of Morgan Keegan and Company.
“Studies indicated that close to 43% of American families spend more than they earn each year. People have been so focused on buying what they wanted no matter what the terms. Now, they are being forced to rethink how they are spending money.”
A CardTrak.com survey in April 2007 of more than 55,000 consumers found that the median amount of credit card debt carried by American households is about $6,600 while the average credit card debt load is $9,659 per household. Of cardholders carrying debt, over 64% had balances under $10,000. However, an astonishing 13% of the same group said they carry total credit card balances in excess of $25,000. The online poll also found that 61% carryover debt each month on their credit cards, while 31% said they pay-off balances monthly and 7% stated they have no credit cards. Of the nation's 111 million households, about 7% have no credit cards and 21% do not have a general purpose or major credit card. Discounting those who have no credit cards and those who only have a low balance store or gas credit card, there are 88 million households using credit cards today.
“When people make decisions about spending they often operate out of emotion instead of thinking through the decision,” said Mrs. Brown. “I know people who purchase items based on what their next paycheck will be versus what they have in the bank. In this economy nothing can be taken for granted. I encourage families to take a hard look at their spending, to set priorities and a budget and to live within their means. With energy and food costs going up this can truly be challenging.”
Mrs. Brown gives the following ideas to help families stretch their dollars as far as possible:
Establish a family budget. Use this as an opportunity to teach your children about the cost of living. Involve them in the process so they understand what it costs for electricity, water, cable, eating out, clothing, insurance, etc. Ask them to contribute ideas for ways family members can help conserve like turning off lights when you leave a room, carpooling or riding the bus.
Take your lunch. Instead of buying lunch at school and work, take your lunch. The Brown’s figured they could save at least $50 a week ($2,600 a year) by not eating out.
Be intentional about running errands. Think about all of the places you need to go and whether or not you will be in the area for some other reason during the week.
Examine your cable options. You may be able to significantly reduce your fee by agreeing to fewer channels.
Buy your specialty coffee at the grocery store. Instead of spending $3.50 on a cup of coffee every morning you can purchase specialty coffee from the grocery store and brew it yourself for about 17 cents a cup.
Go through the drive through to cash a check. If your bank charges you $1 for each ATM transaction and you withdraw money three times during the week that is more than $150 a year.
Don’t buy on impulse. Many times we see things we think we need, but the truth is we can live without it.
“So many people think of budgeting as a negative,” said Mrs. Brown. “I think this is a great opportunity for parents to challenge their kids to see how far they can help make the family income go each month. Most young people have no idea how much it costs to fill up the gas tank or buy groceries much less heat or cool a home.”
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