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Optimism Not Enough to Fix Finances

[Wednesday, January 22nd, 2014]

This is the time of year when many people are excited to make a fresh start, with New Year’s Resolutions freshly made and resolve strong. But a recent poll could be bad news for those who are counting on optimism to carry them through to better financial days.

Throughout the month of December 2013, the National Foundation for Credit Counseling (NFCC) took responses from website visitors to the following statement: At this time next year, I predict that my financial situation will be (a) better, (b) worse, (c) about the same, or (d) no idea.

Fifty-six percent of respondents indicated that their finances would be better. Only 17% thought they would be worse off next year, and 18% felt they would be about the same. Nine percent could not even hazard a guess.

More than half of the 1,134 respondents feeling optimistic about their financial futures might sound like good news, but the NFCC warns that optimism alone isn’t going to be enough to improve people’s financial pictures. They advise people to make a solid financial plan for the year, and offer the following guidelines to keep in mind:

  • Expect the unexpected. Put 10% of each paycheck into a savings account. Most people’s budgets get blown when emergencies and other unexpected events throw a wrench into daily life.
  • Keep long-term savings on hand to protect against setbacks like job loss. In the event of a financial emergency, people with no savings often end up living on credit cards and amassing debt.
  • Keep track of known expenses. Things like birthdays, anniversaries, car registration, taxes, and insurance premiums are things you can plan for. Even though people know these expenses in advance, they often fail to set aside money to cover them and then end up in a financial pinch.
  • Maintain household appliances and vehicles. A broken refrigerator or car can really ruin a financial plan. Things like these often break at the worst possible time, but keeping them in good shape can prevent an emergency down the road. Take cars in for tune-ups, keep appliances clean so dust doesn’t gum up the works, pay attention to any strange clunking sounds—and get them fixed sooner rather than later.

Optimism can be a good thing, but too much can put the blinders on. The NFCC advises people to mix a healthy dose of optimism with a hefty dose of good financial planning.

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