Debt for Life?

“I have a good idea of what I can afford, so I don’t need to budget.” According to the Money for Life Survey, 57 percent of respondents who don’t regularly maintain a budget share that idea. Yet, consumer debt levels continue to rise, with the most recent figures indicating credit card and car loan debt at about $18,700 per household, clearly indicating that there is a need for increased budget and spending management among Americans. People are simply continuing to spend more than they make.

According to the survey, conducted by Impulse Research, 23 percent of respondents begin the year budgeting, but lose momentum as the year progresses, while 21 percent say it is difficult to maintain a budget with more than one person making purchasing decisions and using the same accounts. But author Steven B. Smith says budgeting doesn’t have to be so difficult. In his new book, Money for Life: Budgeting Success and Financial Fitness in Just 12 Weeks($14.95 Dearborn Trade, April 2004), Smith advocates a back-to-basics approach, based on the envelope method, to tackle spending management.

While 59 percent of respondents report regularly maintaining a budget, only two percent of survey respondents use the envelope method, and most (35 percent) use a paper system to balance their budget. “Many people are unfamiliar with the envelope method of budgeting,” said Smith. “But using this method is one of the simplest ways to create and manage a budget. With the help of home budget software like the Mvelopes® Personal online budgeting system, spending management is made even easier.”

The envelope budgeting method is based on using envelopes to divide money on hand, into spending accounts. Each envelope is then targeted toward a specific expense- car payment, telephone bill, rent, etc. When money is needed, it is taken from the appropriate envelope. For example, when the ‘dining out’ envelope is empty, consumers are faced with a choice: either take money from another envelope, or skip eating out for now. “Budgeting doesn’t have to be about restrictions or limits. What it really comes down to is having the critical information needed to make informed spending decisions,” adds Smith. “It’s about making smarter choices.”

Money for Life takes readers on a financial journey via fictional characters, Ryan and Christine Richardson and illustrates how anyone, regardless of household income, can use the principles of an envelope-based budgeting system to achieve not only financial fitness but financial freedom as well. With people vowing to save more money (63 percent), pay off debts (51 percent), and put more money toward retirement (23 percent) in 2004, it’s clear that financial freedom is a hot topic with most Americans. Smith also shows how today’s technology can improve spending management by increasing awareness of money earned, spent, and saved on a monthly, weekly and even a daily basis.

Money for Life also introduces tools that will help readers successfully plan ahead and manage their spending, while regaining control of their financial life. In addition, readers will learn how to plan for unexpected expenses and emergencies, as well as how to stop accumulating debt and plan for debt elimination.

The Money for Life Survey, conducted by Impulse Research, polled a sample of 1,201 adults nationwide. MOE +/- 3%

Americans Say They’re Budget-Conscious But Debt Levels Continue to Soar

New Survey Reveals Americans Budgeting Habits Are Not As Good As They Think

Common Cents

According to a survey conducted by Impulse Research Corporation, 59% of Americans stated that they regularly maintain a household budget. This number is shocking considering the average household debt in America has grown to $18,700, with credit cards and auto loans combined. This ever-increasing debt load suggests that American families continue to spend more than they make. With 3 out of 5 maintaining a budget, obviously many of the methods being used to manage household finances are not effective at reducing debt load or giving the control needed for successful spending management.

  • Fifty-nine percent of Americans state that they regularly maintain a budget with most (66 percent) budget maintainers in the south central portion of the U.S. (Alabama, Arkansas, Kentucky, Louisiana, Mississippi, Oklahoma, Tennessee, and Texas).
  • Women are slightly more budget-conscious than men, with 61 percent of women maintaining budgets versus 56 percent of men.
  • Sixty-four percent of respondents, aged 45 and older, say that they have a good idea of what they can afford, and as such, think that they have no need to maintain a budget. Sixty-three percent of men feel the same way.
  • Sixty percent of people in the north central portion of the U.S. (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin) do not maintain a budget because they think that they have a good idea of what they can afford.

New Year, Same Resolutions

Given the substantial debt carried by the average American, it’s not surprising that financial freedom is top-of-mind this year.

  • Sixty-three percent of Americans resolved to save more money in 2004, while 51 percent wanted to pay off their debts.
  • Most money savers (71 percent) were between the ages of 20 and 24, while most debt payers (60 percent) were between the ages of 35 and 44.
  • Credit card bills take the biggest bite out of people’s paychecks, with 44 percent of respondents citing that as their largest expense.
  • Fifty percent of 25-34 year olds say most of their paycheck goes to auto payments.
  • Forty-nine percent of respondents between the ages of 20 and 24 cite credit card debts as their biggest monthly expense.

Source: Money for Life Consumer Survey conducted by Impulse Research Corporation, February 2004. Margin of error +/- 3 percent