Being in control of your finances is a very important part of your life. Without knowing and completely understanding your money and how it works can be a recipe for disaster. If you go through life juggling debt rather than taking control of your financial destiny, you are asking for trouble.
America has a culture of buying and consuming products which is a good thing as it drives the economy forward. But when you are borrowing money that you don’t have to get the things you want, you need to be aware of what that does and how it affects your finances. Being financially aware doesn’t mean you can’t borrow money, but it does mean you get to be smarter about how to manage your finances and whatever debt you may incur.
The average American has approximately $38,000 in personal debt, and it is going up. A year ago it was $1,000 less than that. That’s not factoring in mortgage loans – it’s purely personal debt. Credit cards and auto loans, as well as student debt, are rampant in our society, and if you don’t get it under control, you will be paying back much more than you borrowed when you factor in interest over time.
Compound interest is one of the topics tested to determine financial literacy, and very few Americans get the answers correct.
The average amount of interest paid by a new car owner is $4,356 over the course of a 68-month loan. If you are buying a used car, even though you borrow less money, you pay more interest over the period of the loan. The average used car buyer pays $4,700 in interest over the period of the loan which equates to $895 per annum. When it comes to credit cards, Americans pay an average of $855 a year in interest charges.
One way to control your money is with a budget. Only 40 percent of Americans use a household budget. 27 percent think they don’t need one, and 7 percent say they’re afraid of even looking at their bank balance. They spend what they need and hope for the best!
Understanding your money better and maintaining accurate records helps you to be in control of your money and make it work for you. If you can’t even look at your bank balance, how can you ever start planning for the future or have any investments and savings?
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