It's no secret the Motor City economy has been struggling to get revved up again, but are Metro-Detroit consumers doing enough to help themselves? A new study says maybe not, and some people in downtown Detroit who agree with that assessment.
"I know a lot of friends of mine will just spend money and not really think about it sometimes," said Christopher Dahmen of Dearborn Heights.
"Some people have shopping problems, so they like to spend their money on shopping all the time," Fan-C Acoff of Detroit.
The folks behind the website Cardhub.com analyzed the country's top 30 metro-areas to see which residents do the best job of managing their money. Metro-Detroiters finished toward the bottom of the list, coming in 25th! (see rankings at bottom of this article)
"Their amount of debt to their income was much higher than it was for the rest of the country," said Odysseas Papadimitriou, CEO of Cardhub.com.
He says the study looked at some key financial factors like the debt-to-income ratio, bankruptcy, and foreclosure rates. Papadimitriou says many Metro-Detroiters didn't have enough savings when the recession hit, so they weren't ready to weather the storm. He's hoping they learn from that mistake.
"Number one, before you do anything else start building an emergency fund," he advised. Further, he says the emergency fund should be enough to cover your expenses for a full year.
Papadimitriou says as part of the savings plan many people might need to take a hard look at what's really a life necessity and what's actually a luxury. His budget cuts might seem drastic to some.
"Generations of Americans grew up without cellphones and iPads, and iPods," said Odysseas Papadimitriou, CEO of Cardhub.com.
Ironically, all the people we spoke with today seemed to know people who spend too much money, while they claim to be working to spend less.
Christopher Dahmen of Dearborn Heights says he already makes sure he has some emergency savings. "I do have a budget. I don't spend too much money. I'd rather have a cushion of savings in case of any emergency, and I do need money."
"I'm more of a thrift-shopper, find the deals, stretch a $20 bill like no other," said Rebecca Branistareanu, also of Dearborn Heights.
Finally, a Detroit woman says saving is the name of the game. "You should save your money. You shouldn't just spend it every time you get it in your hand. The best thing to do is save it. Stack up your cheese, your bread!" said Fan-C Acoff.
How To Save
Here are the tips from Cardhub.com that might give your savings a boost.
5 Tips for Better Budgeting
• Feed an Emergency Fund - Set aside a bit every month with the ultimate goal of having about a year’s after-tax income in reserve in case of an extended income disruption.
• Rank Expenses in Order of Importance - Budgeting doesn’t mean you have to give up all hobbies or creature comforts. Rather, it simply necessitates cutting expenses that you’ve grown to view as necessities even though they’re truly luxuries that are dragging you down into debt. By ranking your expenses in order of importance, you’ll be able to keep the things you value most and avoid all the headaches that come with unnecessary debt.
• Use the Island Approach - This entails separating your debt from your everyday expenses. That will enable you to amass the best combination of low rates and lucrative rewards possible, pay offwhat you owe faster, and realize immediately if you’re overspending (you should never get charged interest on your everyday account).
• Treat Debt Payments Like a Snowball - In constructing your budget, make sure to account for monthly debt payments. When it comes to distributing those payments, you should pay the minimum on all but the balance with the highest interest rate, while attributing the rest of your monthly allotment to that more expensive debt. Do that until the first balance is gone, and then repeat until completely debt free.
• Eliminate Temptation - We all have our spending temptations, whether it’s a high credit limit that we can’t resist exhausting each month or an Xbox that’s begging for some new games. Whatever the spending trigger is in your case, it’s important to eliminate it, even if that means taking drastic measures such as cutting up your credit cards in order to prevent use while continuing to benefit from monthly reporting to the major credit bureaus.
Finally, here's the list of the Top Ten Budgeting Cities, and the Bottom Ten, which includes Detroit.
The 10 Cities with the Best Budgeters
1. Boston, MA
2. New York, NY
3. San Diego, CA
4. San Francisco, CA
5. Minneapolis, MN
6. Washington, DC
7. Los Angeles, CA
8. Baltimore, MD
9. Philadelphia, PA
10. Seattle, WA