Oct. 13--The United States Postal Service never put out a memo, but it's a safe bet that opening mail wasn't meant to be a terrifying experience.
That can't be a good sign. Ditto for consumers whose credit card count approaches the amount of digits on their hands.
If your savings account takes a monthly backseat to cable television and Internet service providers, a change just might be in order. Similarly, if one can discuss fast-food combo prices more easily than the location of the neighborhood grocery store, they are likely living beyond their means.
In the midst of the seemingly never-ending economic crisis that has gone global, many in the financial sector believe there has never been a better time to evaluate spending habits. If they do so, blue- and white-collar workers are all likely to find room for improvement. Savings or reallocation of funds should be vital to anyone fighting gas, utility and food prices.
"This is a great time for people to stop what they're doing, sit down, and do a budget," said Maura Corrigan, a certified public accountant at Cohen & Co. in Mentor. "Regardless how much money you make, you really need to understand what your overall financial goals and objectives are -- those help you to manage your finances.
"It's almost like becoming the CEO of your household."
Most acknowledge this is never an easy process. Some consumers have to fight themselves as much as they combat marketing initiatives from Visa, MasterCard and the like.
"It's easier to make an impulse purchase without really thinking about the budget ramifications all the way through," said Daniel Dotson, a counselor at the Consumer Credit Counseling Service's Willoughby office. "Maybe people overreach a little bit. When you get caught up in those monthly bills, it can really start to overwhelm the budget."
Sign of the times Recognizing a lifestyle that has extended beyond one's means is the least bit effortless. People struggle to break the most dangerous financial practices because they have likely been behaving the same way for years.
Dotson said unawareness of one's credit score remains one of the most glaring warning signs. Once the three-digit ranking treads below 620, the consumer should figure out the cause and make necessary changes, he said.
High balances, late payments and poor debt-to-income rations are usually the main culprits of a low credit score, Dotson said. Credit cards present a particularly vexing situation because issuers enforce hefty late fees that simply pile on top of existing balances.
Righting the predicament is the toughest part because credit bureaus might not reflect your efforts for up to seven years.
"Early recognition is the key, but time is really the best thing to heal a credit report," Dotson said.
A lack of savings presents not only a major sign of overextension, it is also something of which many Americans are guilty. The third quarter of 2005 marked the lowest household savings rate since the Great Depression, as the percentage dropped to minus-0.5, according to the U.S. Bureau of Economic Analysis. The rate has since improved by rising to nearly 3 percent in this year's second quarter, the highest level since 2002.
Corrigan said having about four to six months of paychecks in savings is a general rule that few can make a reality, even if they wanted to. Still, the CPA believes people should never sacrifice paying themselves, even if it's a minimal amount.
"Even if it's 1 percent of your monthly pay, that's a great start," she said. "If you spend $25 a month on cigarettes, Starbucks and candy, you can take that $25 and put it into savings."
Corrigan added that now is not the time to stop contributing to 401(k) plans. While the markets have produced widespread fear, the plans are geared toward retirement -- a stage in life many of the frightened are far away from.
"It's not an asset you'll use until you turn 65," Corrigan said. "History shows the markets will turn around, so now is a good time to get in."
Behavioral patterns Tony Pochiro, a financial adviser at Raymond James in Concord Township, points to habits and behavior as the biggest deterrents to a sound budget.
Each year, he conducts his "How to Live Frugally" seminar to groups that request his services.
"The main theme of my talk is that people just need to change their habits.
It's tough, but put away the credit card. Take out $100 per week, and that's what you spend."
During his talk, Pochiro focuses on smaller spending tips that could add up to big savings. For example, selecting DVDs from public libraries instead of rental stores. Grocery coupons and packing lunches are also some of his favorites.
"People accept these ideas, but most people don't take the time to implement them," Pochiro said. "They say, 'Oh, that makes sense,' but when they go to do them, it's hard to break habits."
Dotson says people who are slow to change might do so because of fear. To him, they're only wasting time that could be spent improving a credit score, lowering a credit card balance or saving for a rainy day.
"There is hope," Dotson said. "It's never too late to change your finances, and there's never nothing you can do. There's never a stage where you can't begin to take steps to correct the situation."
Meanwhile, Corrigan cites a lack of discipline on the part of consumers.
Either way, the consensus remains that the slowdown and bailout should serve as the ultimate source of encouragement for financial awareness.
"For those living on the edge, now is the time to get your finances back in order," Corrigan said. "Do a budget. Don't fall into that trap because there's a lot of people who have, and it's sad."
SIGNS THAT YOU MIGHT BE LIVING BEYOND YOUR MEANS:
-- Your credit score is below 620
-- You are saving less than 5 percent of your income
-- Credit card balances keep rising
-- More than 28 percent of your income goes to your house
-- Bills are spiraling out of control
-- You fear opening mail
-- Not knowing your total debt
-- Using payday lenders
Source: Investopedia.com and the Consumer Credit Counseling Service
