Most of us don’t realize how much our emotions are tied into our spending habits and our debt load.  Personal finance is a lot more about personal than it is about finance.  Do you fear for your financial health?  It’s normal to feel this way until you get a handle on your finances and your debt.  Knowing exactly where you stand and putting a plan in place is the only way to overcome those feelings.

We’re all familiar with the term “comfort food” and we often turn to comfort food when fear, worry, or frustration are bothering us. For many people, the same can go for spending. They go out and spend when they feel stressed out or frustrated. Or they buy something on “impulse” without thinking about how it affects their bottom line and their future.  For many people, spending money is a form of stress relief.

Fear, worry, and stress all create a climate for making bad choices and a lack of focus on what you should be doing and what you want for your future.  As you buy more of what you really don’t need, you’re robbing yourself of your future income for retirement by not contributing enough.  Your emotions can lead you to become focused on today and trying to comfort yourself while you push your needs for tomorrow into the back of your mind. If you aren’t thinking about your future, it’s one less thing to be stressed about.  So when are you going to think about your future?

Understanding where you are financially is critical

Where do you feel you are right now financially? Are you treading water with no land in sight? Are you on a path where you think you’re heading in the right direction but aren’t really sure? Are you just winging it and hoping for the best? Or do you have a plan in place and know exactly where you are financially?

I’m going to guess that where you are today is not where you thought you would be if you had written it down 10 years ago. Most people haven’t made much progress in the last 5 years on paying down their debt and many have actually increased their debt.

If you’re not getting ahead of your debt and building your future like you want, why not?  Let’s look at a couple of the pitfalls or mistakes we make in managing our finances.

First of all, who do you listen to?  Are you getting advice on your finances from your friends or family?  Unfortunately, they’re usually in the same financial situation that you are, if not worse.  We tend to spend our time with people that are a lot like us.  So if they aren’t in a drastically better place than you are, why would you listen to them?  You need to listen to people that are either much better off than you due to what they did themselves about their finances, or you need to listen to a financial professional with a track record.

What about the people on TV, talk shows, or the internet?  Be careful there.  You have to remember that many of the big personalities make a lot of money off of books, website subscriptions, advertising, and newsletters. They may not appear to be charging people for their “advice,” but they are getting paid a lot of money through other ways. Some of them give great advice and some of them really don’t. And it’s easy to get into information overload when you spend your time watching or listening to them since they have to cover many topics to appeal to a large audience.

Are you on the path to financial security?

Another mistake that almost everyone makes is not knowing how much money they really owe when you include the interest that you will pay out based on how you’ve actually been paying your bills. You can’t rely on looking at the balances due on your statements.

Fortunately, you can change the path you are on quite easily. You really need to find out how much you owe on all of your debt and how long it will take to pay off. Knowing this alone could help you make better decisions and could help you reduce unneeded spending.