Feeling powerless leads to overspending

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Undeniably, the nation's struggling economy and housing and credit crunch have impacted many Americans. The complex nature of our turbulent economy can leave some consumers feeling powerless, which has a surprising added impact on personal finances.

A recent study conducted by Northwestern University shows that the more often we feel powerless, the more likely we are to spend beyond our means, in an attempt to regain control of the situation around us. This study may help explain why Americans who are deeply in debt continue to spend more than they can afford, perpetuating the vicious cycle of helplessness.

While it is wise for consumers to understand the nation's economy as a whole, it is even more important that they empower themselves to take good care of their personal economies-their monthly income, expenses and investments. Aside from resisting the " urge to splurge," there are many ways consumers can take control of their own finances and regain a sense of power and security. Consider these tips from Money Management International (MMI), the nation's largest nonprofit, full-service credit and debt counseling firm.

Deal with the big issues. If you have large, looming financial issues, such as unpaid debt or tax liens, it is time to deal with them head-on. Contact your creditors and make acceptable repayment arrangements. Implementing a plan to remove these stressors from your life will be good for your mental and financial health.

Expect the unexpected. Now is a great time to start paying yourself first, to be prepared for unseen expenses. Strive to establish an emergency savings account equal to at least three months of your income. If this goal seems too lofty, try having a small amount automatically deducted from your paycheck into a savings account. As they say, out of sight, out of mind-you won't spend it if it's not in your checking account.

Do a credit check-up. A positive credit report means better loan terms and more borrowing power-two of the most powerful tools you can have. Experts recommend that you review your credit reports annually and before making any major purchase. To obtain free credit reports once per year, visit www.AnnualCreditReport.com.

Plan for your future. Secure your financial future by participating in a qualified retirement plan, such as an employer-sponsored 401(k). You can also contribute up to $3,000 each year into an Individual Retirement Account (IRA).

Today's economic climate may leave some reluctant to put their money in long-term investments, but it is important to remember that, despite everything, there has been no 10-year period in the previous 50 years where the stock market has not gained value. Individual stocks have failed, but overall the stock market has performed well for the long-term investor.