Eight in ten Americans say they are very confident or somewhat confident that they would know how to deal with extreme debt, according to a survey by TrueCredit.com.
Of course, a lot of debt comes from overspending on credit cards. The average American household has over $9,000 in credit-card debt. But unforeseen financial strains, such as those brought on by illness or job loss, can also quickly add debt. You’ll know that you’re in extreme debt when you’re only paying money towards that debt and saving nothing.
One way of figuring if you’re in serious trouble is to use a debt calculator. If you do need to take drastic measures, consider:
• Work more overtime or get a second job.
• Move to a cheaper house or location.
• Get a roommate. Rent out some of your space.
• Sell your car. Especially if you have more than one, this will save you money on insurance, gas and maintenance.
• Give up the vacations and other indulgences.
Retirement survey shows contradictions
Most Americans are pretty sure they’ll do just fine in retirement. The latest Retirement Confidence Survey, released in April, found that 65 percent of workers are either very confident or somewhat confident they’ll have enough money to live comfortably in their retirement years.
A lot of us are kidding ourselves.
The survey by the nonpartisan Employee Benefit Research Institute in Washington, D.C., reported that 20 percent of those who say they are very confident are not currently saving for retirement. And 37 percent of workers who have not saved a dime for retirement are somewhat confident they’ll do all right.
The raw numbers are not encouraging. According to the Brookings Institution’s Retirement Security Project, in 2001 half of all American households headed by people between 55 and 59 had less than $10,000 in sheltered retirement plans such as 401(k)s or IRAs.
Even if you take out the 36 percent of people who had no accounts at all, the median balance in these accounts was still only $50,000. While statistics show that more than 80 percent of eligible workers have balances in their company’s plan, many of them are currently contributing little or nothing to their accounts on payday.
New baby is no stroll for family budget
There’s little that’s more exciting than welcoming a baby into your life. And yet the delights of a birth can be quickly overshadowed by financial strains.
“The short-term expenses are the ones that people always think about. Diapers and wipes, baby clothes, toys and hardware like the crib and rocker and so on. That’s the stuff that you need right away. The going rate for just getting the baby set up immediately is about $6,200.” So says Todd Mark, spokesman for Consumer Credit Counseling Service of Greater Atlanta.
But preparing long-term for a new baby’s effect on your life and finances is imperative for parents. Mark has some advice:
• Think first about health insurance for the new member of the family. Sometimes you can save as much as $200 a month by purchasing an individual policy for the baby instead of adding him or her to the health insurance you have on the job.
• Get life insurance, if you don’t have it already. “You need to have your new baby financially protected and have directives in place that say what happens with the care of the child in the event of your death.”
• Start a college-savings plan, such as a state 529 plan.
• Watch your spending. Beware of items that are marketed to you as needs rather than wants. Some of the latest are “ultrasafe” items like cribs or jumpers, or “teaching toys” to “make your baby brainy.”
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