Getting Smart with Money: The Root Cause of Money Problems

Here are three articles I found this week that you might enjoy or find useful.
1.  Your Spending Problem is All In Your Head - Here’s Why
I liked this article not because it had some groundbreaking information, but because it was a reminder that the simplest solution to a problem is often the best solution. If you’ve been telling yourself that you’ll start budgeting or gain control of your finances once you find the perfect tool or just-right budgeting software, keep searching. This article addresses the root cause of money troubles—that most of us hit the skids with our finances not because we have bad tools, but rather because we are bad at making good financial decisions—and how the tools that are supposed to “help” us are actually disconnecting us from the process of being aware of our money habits. The author makes a strong case for thinking critically about purchases; using cash to feel the “pain” of spending money; and exposes some of the systems used by almost anybody who wants some of your hard-earned money.
2.  The Budget Gimmick that Undermines Public and Private Finances
(or, “I’ll Gladly Pay You Tuesday for a Hamburger Today”) Tax “reform” has been at the top of the news recently, and with good reason. This article from the Tax Policy Center’s blog exposes one piece of the proposed tax reform plan where pre-tax worker contributions to 401(k) plans are reduced from $18,000 to $2,400 annually with the remainder needing to be contributed to a Roth (after-tax) 401(k) plan. This budgetary sleight of hand would mean higher current tax revenues for the government while providing less opportunities for employees to legally shelter some of their income from taxes through pre-tax retirement contributions. Regardless of your political leanings, this provision perpetuates the short-sighted thinking we have grown to expect from our federal government and amounts to not much more than a tax shell game.
3.  A Boom in Credit Cards: Great News for Banks, Less So Consumers
I won’t mince words—I didn’t like what I read in this article. Namely, that more and more Americans are using credit cards as their financial safety net, with credit card debt reaching a record $1 trillion this year. While this is bad news for consumers, it’s great news for banks, who now find credit card interest and processing fees becoming their largest profit centers. Interestingly, the banks have deemed most credit card users “credit worthy” with defaults remaining low. This is unsettling because like a frog in the pot of boiling water, we Americans seem to have gotten so complacent about payments as a way of life that our tolerance for them has increased and increased where they have become the new normal.
Personal finance, money, and taxes can be scary, but none of this stuff is rocket science (or brain surgery, depending on your complicated metaphor preference). Being aware is key. Focus on what you can control and do a little something each and every day to get better.
- Shay