After completing high school and even four years of college in some situations, it’s amazing how few people go out into the world prepared to properly handle their financial matters. Unless someone finds him or herself on a business track, there is simply no training or education provided on issues such as personal budgeting and dealing with debt. Unfortunately, it doesn’t take a finance major to see where America’s personal debt numbers are going to lead so many consumers.
The Numbers Spell Trouble
In May of 2015, the Federal Reserve issued a follow up report updating data previously released in mid-2014. According to its numbers, the Federal Reserve reported Americans were carrying $11.85 trillion in debt. While $9.85 trillion of that debt is secured, there is still another $2.0 trillion in unsecured debt that stands to be problematic. The biggest issue seems to be the average American household is carrying over $17,000 in credit card debt, which is simply unsustainable for the average American family that has to use 14% of its disposable income paying down credit card debt. The potential for financial hardship is evident by the fact 2.2 million people filed for bankruptcy for the 24-month period ended October 31, 2014 (US Bankruptcy Court).
The Effects of Poor Financial Management
Anyone who has ever encountered financial difficulties has most certainly experienced the way it can negatively impact one’s life. Anytime you live with overriding stress on a day to day basis, it tends to permeate all areas of your life. The mind isn’t able to stop thinking about the end result of debt problems. Will it result in bankruptcy or losing assets? Will you have to move? What about the kids education? These are just some of the questions that will start weighing on your mind. Both your attention span and temper might get shorter, creating problems at work and in your personal relationships. When debt problems become unmanageable, it takes no prisoners.
Preventing Financial Hardship
By the time payments are being missed and creditors are starting to call, you are going to be forced to consider debt relief options such as debt consolidation, debt settlement and bankruptcy as a worst case scenario. It would be a far better idea to put safeguards in place before debt issues reach crisis mode. That demands you learn the kind of debt and financial management skills that will keep you from making poor financial decisions. If you have ever been part of an organized sport, you have been exposed to coaching. A personal finance coach might be the best way to learn the skills necessary to prevent financial hardships.
Benefits of Hiring a Personal Finance Coach
Regardless of your debt situation, it’s never too late to learn how to better manage your finances. That said, it’s far better to hire a personal finance coach before problems become evident. The benefits of hiring a personal finance coach include:
1. Developing Financial Goals - One of the biggest failings of young people is not taking the time to establish short-term and long-term financial goals early in life. Financial goals are necessary to provide you a target for reaching retirement financially solvent.
2. Learning Accounting Concepts – Most people don’t understand basic accounting concepts such as assets, liabilities, cash basis, debt ratios and budgeting. With a crash course in some of these basic accounting concepts, you will get a sense of how important it is to prepare a budget and control your spending.
3. Learning How to Invest and Save - Learning to save money for key purchases (home, car) and retirement is the key to avoiding financial hardship. Personal finance coaches can teach you how to save money, invest it wisely and keep yourself financially stable no matter what occurs during your life.
If you would like more information related to the value of hiring a personal finance coach, you should schedule an appointment with one of our professional debt counselors here at Rescue One Financial. We can hopefully advise you on your financial matters and help you locate the finance training you want or need.