Q&A: Spending, Budgeting, and Debt

Talking about money is often problematic. It is still considered one of the taboo topics that we feel uncomfortable speaking about with others. Some feel it is impolite to talk about it, others feel it is a private issue that should not be shared. And there are also people who avoid discussing money or asking questions about money matters because they fear they might misunderstand and do not want to feel embarrassed. Whatever the reason for avoiding the discussion, the reality is money and financial matters are not discussed as they should be.

Talking about money with other people allows us to learn more about money and how to effectively manage it. The more questions we ask and discussions we have, the more ideas we get and strategies we discover. Discussions of this type can help us make better financial decisions and create a stronger financial future for ourselves and our families.

With the goal of full disclosure in mind, every month our financial experts answer your money and finance questions. We want to encourage visitors to this site to learn and grow by discussing money matters, budget struggles, and helpful financial planning. If you have a question for our team, please reach out to us online on Facebook, Twitter or through this website.

Here are this month’s terrific questions for everyone to enjoy and learn from:

A:  Overspending or spending money in the wrong places is a big problem for a lot of us. For some, it is the desire to always have the “latest and greatest” that can put a huge dent in their budget. For others, it is a series of many smaller purchases that end up adding up once you the monthly credit card bill arrives. In many cases, people are using shopping for entertainment, to socialize, as stress relief, or in many other ways. The latest fad is “revenge shopping” to make up for the 16 months we have been locked down during the COVID-19 pandemic.

If you find yourself frequently overspending and buying things you do not need, or just cannot afford, one of the first steps is to recognize where your money is going and why you are spending more than you know you should. Track your spending, add it up, and see where it is all going. Then consider those purchases and why you brought them home. Were you bored when you bought those things? Tired? Stressed? Figuring out your state of mind when you tend to spend the most will help you understand your “spending triggers.” Knowing the triggers can help you adjust your behavior. For instance, if you know you are more likely to spend when you are stressed, try to come up with other ways to deal with this emotion other than shopping.

It is a good idea to always think about purchases before you make them. If you see something you want to buy, put down the item or close the website and force yourself to think about the purchase. For example, one of our clients recently shared with us his “tactic.” He usually puts an Amazon item he wants in his shopping cart but does not hit the “Proceed To Checkout” button right away. He then takes a few days to decide if he REALLY needs the item.  If he does, he goes head and completes the purchase.  If not, he deletes it from his cart and his bank account does not take the hit.

The more something costs, the more time you may want to take thinking about the purchase before committing to it. Sometimes just the act of making yourself think can stop you from spending money you do not have.

A:  Most of us have some debt. Without borrowing money for larger items, the convenience of using a credit card to gas up the car or even some of the “buy now pay later” offers we see online, it would be exceedingly difficult for a lot of us to navigate through our lives.  Debt can also be the cost of a post-secondary education or a mortgage for home ownership. However, too much debt can be a problem. To figure out if you have too much debt, you may want to begin by examining the difference between good debt and bad debt.

Good debt is money borrowed to improve your life in some way, or money borrowed to purchase something which will eventually increase in value. For instance, borrowing money to go to school can often be seen as good debt, as can obtaining a mortgage to buy a home.  If most of the debt you have is “good debt,” you might be in a good financial position. However, the situation is not always black and white. Getting a car loan can sometimes be considered bad debt (especially if you finance more car then you need), but if buying a car helps you get to your job, and allows you to support your family, it could be considered a good debt.

So how much debt is too much? That amount will fluctuate and is often dependent on your income. But if you are struggling to pay your bills, if you can only make your minimum payments, or if you need to take out new loans to pay off existing ones, you likely have too much debt. In general, the rule of thumb is that less debt is always better.

To reduce your debt, look at your current budget, do your best to trim your costs, and then use the money you have found in your budget to begin paying down that debt faster. If you cannot fit all your expenses and your debt repayment costs into your budget, even after you have made cuts, you likely have too much debt.

If you have too much debt, and are struggling to get ahead of it, the licensed professionals at Farber are available to help.  Please CLICK ON THE FREE CONSULTATION button, below, or give us a call today by clicking on the phone icon, to set up a no-no-obligation free consultation with one of our team.  We are here to listen – and to help!