STARTING OUT


Have You Heard the Wake-Up Call?

Erin Burt

Mad about the financial crisis? Learn from the nation's mistakes and reevaluate your own money habits.



A recent Gallup poll found that 90% of us are dissatisfied with way things are going in the U.S. now.

And it's no wonder. Our government debt has exploded to $10.3 trillion. On top of that, U.S. consumers are $2.6 trillion in debt. Unemployment is rising, the dollar and consumer confidence are falling, and our retirement account balances have withered by $2 trillion -- about 20% of their value -- in the past 15 months.

There's not much you as an individual can do to make a dent in those national figures. But rather than joining the pundits in a fruitless game of finger pointing, there is something you can do about the state of your personal economy. Don't like where the country's headed? Learn from our mistakes.

Back to basics

If you, like most Americans, are disgusted at the wasteful spending and skyrocketing debt, take this opportunity to evaluate your own financial habits.

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There is no secret to financial success. You know the formula:

  • Live within your means

  • Get out of debt

  • Save some money

Yet somewhere in the past few years, we -- along with Uncle Sam -- have lost sight of that. We've fallen victim not only to keeping up with the Joneses, but also to keeping up with our own fantasies. Credit came easy, and we thrived on money we didn't have. We could afford bigger houses, exotic vacations and huge TVs. As our whims ran wild, so did our debt. Live within our means? How archaic. If you can afford the minimum payment, why bother getting out of debt?

And as for savings, you have plenty of time to make up for it later, right? In the mid-1970s, American consumers saved about 9% of their after-tax income. Today, that figure hovers around zero, according to the Bureau of Economic Analysis. After all, you may have rationalized, why bother saving for tomorrow when you can have what you want today?

Welcome back to reality. Living within your means isn't old fashioned -- it's smart and relevant, perhaps more today than ever. Debt isn't a way of life -- it's bondage. Saving isn't a drag -- it's rewarding, not to mention a great comfort in tumultuous times. These are eternal truths that stand in any economy.

If you get anything out of this whole financial panic of 2008, I hope it is this: Life happens. Be prepared.

A few months ago, who would have dreamed that such towering business stalwarts as Lehman Brothers, American International Group or even Washington Mutual would fall in a matter of weeks? Who would have thought other countries would start viewing our government-backed debt as a shaky investment?

It doesn't take long for your personal fortunes to change either. A job loss here, a rising interest rate or car repair there, and soon that "easy" payment isn't quite so easy.

Heed the wake-up call. Take this opportunity to adopt responsibility back into your own money-management routine. This is not something to be dreaded, but rather embraced. Regain a solid financial footing and you'll set yourself up for success, no matter what economic forces pull at your pocketbook.

Now, if only government and businesses would follow suit.

Getting re-started

Below I've collected a handful of stories and tools to help you regain control over your personal finances. Also, be sure to check out our Basics section for more timeless advice on every topic.

LIVE WITHIN YOUR MEANS
Stop Living Paycheck to Paycheck
Save Money on Practically Everything
How to Create a Budget
More Budgeting Tools

GET OUT OF DEBT
How I Kicked the Credit-Card Debt Habit
Live Debt-Free
What Will It Take to Pay Off My Balance?
More Debt Tools

SAVE SOME MONEY
Why You Need an Emergency Fund
Five Best Ways to Save for Retirement
How Much Will My Savings Be Worth?
More Savings Tools




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