Don’t forget recession's lessons
In March, revolving credit balances increased for just the second time in almost three years.
Federal Reserve data released earlier this month showed credit card debt rose by about $2 billion in March. The only other monthly increase since late 2008 came last December, during the holiday shopping season.
This suggests Americans are feeling more confident in the economy -- and more inclined to swipe.
While a stronger economy and improved consumer confidence is a good thing, I worry some of us will quickly forget lessons learned from the recession as we return to discretionary spending.
Many households suffered serious financial hardships as a result of job loss and overwhelming debt. As the job outlook improves, it is important remember how quickly things can change.
Here are 3 things you can do to stay out of debt:
- Build an emergency fund. Who can predict what will happen in the future? It is almost certain at some point everyone will face a financial emergency, whether it be job loss, illness or injury or car repairs. If you do not already have an emergency fund, write one into your budget immediately. This is the first step toward preventing future debt.
- Put more into savings. Where the emergency fund covers unexpected expenses, your savings account will cover anticipated expenses. Looking to buy a new car, go on vacation or remodel the kitchen? This is where savings will eliminate the need to make purchases using credit.
- Mind you investments. Once you have budgeted contributions to an emergency fund and general savings, you can focus on investing in your retirement. A Roth IRA is an excellent option for qualified investors. The ability to save for long term goals with the flexibility of early distributions free of taxes and penalties is attracting many consumers to this individual retirement account.