My mother used to use this phrase all the time: “That’s just robbing Peter to pay Paul.” Now, I wasn’t exactly sure where it came from, but I knew what she meant. If you find yourself always a little short, pulling money from one pot to put in another — and not having enough in either — you know the strain of financial stress.
It can flat out wear you down. Kimberly Palmer, author of the Alpha Consumer blog, has put together a handy list for the “Constantly Broke.” For those trying hard, but still fighting to keep your head above water, ask yourself these questions:
1. Do I know where my money is going? Not some of it; all of it.
2. Am I focusing too much on the month instead of the year?
3. Do I do something every day that wastes money?
4. Do I know my own weaknesses?
5. Am I saving too much?
6. Is my relationship hurting my bank account?
7. Are the big items dragging me down?
8. Am I wasting money by carrying debt?
Here are few excerpts worth noting:
Question No. 2: Am I focusing too much on the month instead of the year?
Research suggests that people often fall victim to forgetfulness when budgeting by the month. They tend to overlook unexpected and one-time expenses, such as car repairs or gifts, so underestimate how much they’ll need to spend. But when people budget by the year, they tend to factor in those costs. Research by University of Southern California’s Gulden Ulkumen, Cornell’s Manoj Thomas, and New York University’s Vicki Morwitz found that college students were about 40 percent off-target when budgeting by the month, but only three percent off base when thinking by the year.
Question No. 5: Am I saving too much?
This question might sound counter-intuitive – how could anyone be saving too much? But if you’re going into debt to fund your lifestyle and you’ve already cut back wherever possible, then it’s time to look at how much money you’re funneling into your 401(k). While it always makes sense to take advantage of matching programs from your employer, it doesn’t make sense to save additional pre-tax dollars at the expense of a hefty credit card bill that comes with a 10 percent or higher interest rate.
Question No. 7: Are the big items dragging me down?
According to Elisabeth Leamy, Good Morning America’s consumer correspondent and author of Save Big: Cut Your Top 5 Costs and Save Thousands!, it’s the big items, not the small ones, that hurt people’s finances the most. She suggests focusing on minimizing your mortgage, car, health, debt, and grocery payments. Buying a used car instead of a new one, for example, can save drivers tens of thousands of dollars. Plus, she says, since “cars these days are really well built, the risk is lower than it used to be.”
Blog question: Are you “constantly broke?” What do you attribute it to? What solutions do you have?