There comes a point in every life where something needs to change. In Western culture, this more-often-than-not involves making financial changes. If you’re at a point where you’d like your financial life to look differently than it does, or even if you’re just wondering what it could look like, here are some tips on getting through the process.

Where are You Now?

For some people, this is an easy question. But if you don’t have meticulous records and can’t account for every penny you’ve spent over the last several years, you can still figure out where you’re at.

First, look at all your account balances. Include any investment or retirement accounts. Then track your spending for a week. This will give you a good snapshot of how you typically spend.

Look at these items, along with any other relevant financial information you might have. For instance, if you know you’re getting a raise soon or you’re sure there will be money coming in from a trust fund or an investment, consider that, too.

Take your time with this process, until you feel like you have a good feel for where you are financially. You should know what you have, how you spend, and have a rough idea for what your financial future looks like before you move on to the next part of the process.

Where Do You Want to Go?

Make a list of everything you’d like to do that involves money. This is where you get to dream. Are there things you’ve always wanted to do but haven’t had the money? Are there things you would do if money weren’t a option? Add them to the list.

Consider practical things, too. Maybe you’d like to pay for your kids to go to college, help your mother pay for her nursing home, or start a new business. These things all go on the list, too.

When your list is done, take some time to look it over. While you probably cannot make every item on it an immediate goal, as you muse your way through it you’ll find that some of the things on the list are more important to you than others. If something stands out, mark it in some way.

Depending on how much discretionary income you have, you’ll want to whittle this list down until it contains only a few items that are very important to you. These are the things you’ll have the most motivation to go after.

Turn Your Dreams Into Goals

There are many methodologies for setting smart financial goals.  Here is how we recommend you do it:  now that you have a short list of items that mean a lot to you, translate these into goals. “Take the family to Fiji” isn’t a goal, because it’s too generic. Instead, break it down into smaller, concrete steps.

You could start with, “Save $100 towards Fiji trip every month for 6 months.” After that, you might try to save $200 or even $300 every month. You should also put, “Research Fiji trip,” on your list of goals, so you’ll know how much you’ll need to save.

Dreams often don’t come true because they feel too big and too far away. “Take the family to Fiji,” can feel like it’s impossible and impossibly far away, especially if you’re struggling just to make ends meet. But researching it, a much smaller task, feels completely do-able, as does saving $100, $50, or even just $10 this month towards the trip.

Once you’ve broken your dreams down into goals, set a realistic timeline for them. In the example above, it’s probably best to research the trip before you set a savings goal, so you know how much you’ll need to have. Similarly, make sure you give yourself plenty of time to save the money, so it doesn’t become something stressful.

Get to Work

When you have your dreams outlined into step-by-step goals, there shouldn’t be anything holding you back from starting towards them.  Follow your plan as best you can, knowing that things always come up. If you have to take one of your kids to the ER for stitches, you may not be able to save that month. That’s ok - just pick up where you left off the next month.  If you're having a hard time achieving your goals, you may want to revisit them and adjust them, or perhaps think about setting up an emergency fund with supplemental income.   The important part it to stick with your goals and make it a habit.

Though it may be slow, seeing real progress towards your goals and, therefore, towards your dreams, will help keep you motivated even when its hard going. It will also encourage you because, finally, your life is going in the direction you want it to go.

Image courtesy of Sabrina Eras.

Getting sick or having a major medical condition is awful, but many people who’ve been in that situation say that the bills that follow a major illness or injury are just as bad.  In fact, these can pile so high that they feel like another injury in addition to the original one.  Some patients find that the stress that comes from trying to figure out how to pay for their illness makes them sick all over again.

While most people have health insurance of some sort, many only find out that theirs is not as good as they’d hoped after they’ve already been in the hospital or racked up many bills another way. That’s part of the healthcare crisis in the United States, because being under-insured could be as bad (or worse, sometimes) than not being insured at all.

Planning for emergency expenses is always the best way to avoid the situation altogether.  But even the most conservative budget ninja could find herself in a medical situation that requires large amounts of money.  If you find yourself in a situation where you owe more in medical bills than you can pay, don’t let the stress overwhelm you. Instead, take a deep breath, assess your situation, and follow the steps below.

1. Talk to the People You Owe

Before you do anything else, call the hospitals and other companies that you owe money to. Let them know your situation, and explain that you cannot pay the full amount. Be ready to demonstrate how much you make and the total of your monthly expenses, as they might need these before they can negotiate with you.

Note that making this call may have a different effect with different companies. Some are happy to work with you, and in fact reduce bills routinely for patients who cannot pay the full amount. Others may be more difficult, or may not have a standard procedure in place to deal with your situation. Give them the benefit of the doubt, though, and you may find your bills reduced drastically.

2. Find Out if There’s Public Assistance Available

This can vary widely based on the state you live in and even where in each state you live. However, there are many public assistance programs geared toward helping people pay off medical debt that they cannot pay themselves. Check with your hospital and other government agencies to see what’s offered in your area and what you need to do to qualify for it.

When exploring this option, be extremely careful not to go with scammers.   If you use your favorite search engine for words like "debt relief" or "medical debt program", you will find hundreds of for-profit businesses, some of them not very ethical, that are only looking to make a buck off of you.   Look for non-for-profit organizations or foundations driven by ethical or religious motives such as the Neighborhood Health Initiative (NHI) in Des Moines as featured by the Annie E. Casey Foundation.

3. Start Making Payments

Even if you cannot pay off all of your debt, start making monthly payments towards it. Ten dollars a month may not sound like much to you, and it may not be more than a drop in the bucket of what you owe, but paying it each month demonstrates your goodwill to the company you owe.

In some states, companies to whom you owe medical debt cannot pursue you for the balance as long as you’re making monthly payments.  Laws on this issue can be complicated and will vary widely by state, but it’s worth looking into if you find yourself in a difficult situation.

Another option is to use a service that allows you to delay payments for a month for a fee such as Billfloat.com.   This helps you delay your payments for a short time period to help you get your numbers in order.

4. Look at Getting a Personal Loan

Going into more debt in order to pay off debt may not make much sense the first time you think about it. However, securing a personal loan for the medical balance that you owe to medical companies may give you a chance to pay your bills, get the company or the debt collection they reported you to off your back, and let you make payments that you can afford.

Some lenders may also be more likely to give you a personal loan if they know the situation behind your debt. While you don’t want to manipulate anyone, simply stating why you need the money can let them know that you are a responsible person who pays your debts, even if you’re currently in a bad situation.

However you manage to take care of your medical debt, don’t just ignore it. It’s easy to feel overwhelmed, especially if you’re still recovering from the illness or injury that caused the debt in the first place. Medical debt won’t go away on it’s own, though, and it’s usually easier to deal with it before you’re reported to a collections agency. So take a deep breath and get started today. The sooner you find a solution, the sooner you can stop worrying about it.

Image courtesy of Brooks Elliot.

Since August of 2008, just before the bottom dropped out of the housing market and the current financial crisis got its start, credit card debt in America has dropped or stayed at the same levels.  Consumers have practiced an uncharacteristic frugality, spending less and paying off their bills in full when they do use cards. They have controlled their buying habits, because they saw the trouble that spending had gotten them into.

Until now.

In a report released by the Federal Reserve last month, credit card spending seems to be climbing back up once again.  At the end of December, it was up $2.3 billion from only a month previous, which is an annualized rate of 3.5% growth.

And that may only be the tip of the iceberg.  Banks will charge-off credit card debt that consumers cannot pay, and this isn’t collected in the Fed’s statistics. If this amount was $5 billion in December, which is a reasonable approximation, then debt could have grown by as much as 20% more than what was reported.

All of this leads us to ask, “Why?” Haven’t Americans learned anything in the last two years? What makes people think that they can add debt now, when six months ago they weren’t comfortable doing that? Has something changed?

Here are some reasons why consumers are feeling more comfortable adding debt again:

1) New Credit Card Rules
With new rules regarding credit cards, including caps on interest rates and statements that are easier to read and interpret, it’s likely that most consumers feel safer using their cards than they used to.  Even if they don’t know or understand the details of the new laws, the fact that these exist and have been reported on extensively by the media lure people into a sense of security.

However, this security might be false. Interest rates were not capped at a level most experts would consider “low.” In fact, they can still be much, much higher than the rates that come with borrowing via traditional loans. Consumers still need to take care that they don’t use credit cards to run up bills they cannot pay off, or they’ll find themselves in the same kind of trouble they were in before.

2) Economic Improvements
To most Americans, the economy seems to be doing better. Though unemployment rates are still relatively high, layoffs have, for the most part, stopped. In addition, the DOW Jones and the S&P are rising steadily, and people associate overall economic health with the health of those indexes.

While the economy is recovering slowly, that doesn’t necessarily mean that it’s a good idea to move back into the “spend today, pay tomorrow” mindset. After all, that mindset is a big part of what caused these problems in the first place. If everyone moves back to functioning that way, the economy could teeter on the edge faster than most people might think.

3) Jobs are More Stable
Though most companies aren’t hiring a lot of new positions, those who have retained their jobs are less likely to lose them than they were even a few months back. Unemployment numbers have looked better the last 3 months, plunging nearly 1 percentage point.  This means that people know how much they’re making, and feel confident in having a steady income over the foreseeable future. Thus, they’re more comfortable spending because they know that they won’t get stuck without the money to pay anything off.

There’s truth and falsehood here, though. While it’s true that having a steady income makes it easier to pay off credit card debt, running up bills so high that you struggle to make minimum payments is never a good idea. A solid income gives a little more freedom for spending, but consumers should still make sure that paying off their debt is within the capacity of their income.  Debt-to-income ratio is an important indication of a person's credit health: the lower it is, the better.

4) Times are Tough
While many Americans are doing better, the effects of the economic crash and the credit crunch still linger in many families. With credit cards slowly becoming easier to obtain, like they were before, some of these cash-strapped folks may be covering their basic needs in the only way they know how: with credit.

It’s usually better to pay your bills than to default on them or to pay them late. However, when you pay one bill by racking up another, it’s hard to know if you’re making a good choice or not. When there’s no other option, credit cards are better than nothing. That bill will come due before you know it, though, and you’re not in a much better situation if you can’t pay it off.

5) Old Habits Die Hard
Before the markets crashed in the fall of 2008, the United States had experienced a season of market growth. In times like that, people always spend more and use credit more freely. Over time, spending money like that becomes a habit. While relative poverty can enforce frugality for a time, a society like ours, that touts material possessions and excess, will almost always go back to spending when things even out.  Perhaps, after a few months of counting every penny that comes in and goes out, Americans are feeling frugal fatigue.

Right now, Americans are tired of looking at things that they can’t have. They’re tired of feeling poor, and they feel like they’ve reined themselves in long enough. Spending less for two whole years took a lot of energy, and now that there are hints the overall situation is improving, consumers have their credit cards out and ready to go.

Let's hope the trend is just a cyclical result of the holidays and a bit of optimism, but if Americans are spending more without the means to pay for it, we are headed to yet another set of financial troubles.

Are you using credit more or less than you used to? Tell us why in the comments.

@RobGarciaSJ

PS. A hat tip to Daily Finance, WalletPop, and the The LA Times for the statistics quoted in this article and some of the insights that prompted it.

Plato once offered an answer to what drives innovation: "Necessity, who is the mother of invention".   This can't be more true today in the banking and financial services industry.  So how have customer needs changed in the last few years, and what does it tell us about the future of money?  I try to answer these question after listening and interacting with visionaries in the financial and start up worlds who were present at the top financial innovation event in the country: The Future of Money and Technology Summit.

Overall, I found myself immersed in a sea of positivism and excitement about the future of financial services.  Yes, there was  dose of realists at the conference, and to certain extend retrograde thinking.  Mikki Langston, one of the attendees at the conference, summarized the vibe in the crowd in her tweet: "There are 2 groups present: those who want to expand their financial empire, and those who want to change finance completely." Yet overall, you could feel the almost unanimous agreement that the future of money is bright and innovative for banking, payments, transactions and money management.   Here is what the future holds:

It Will Be Very, Very Different
The last 3 years have provided the perfect opportunity for start ups and big banks alike to innovate.  In an environment of credit crisis and financial instability, banks are trying to figure out how to make up for loss of revenue, while start ups are finding endless opportunities to fill the big disillusionment hole left by the traditional financial institutions. “What it means to be a bank is up in the air,” said Schwark Satyavolu of BillShrink. “There’s an opportunity to fill huge gaps in what has been a static industry for hundreds of years.”

Customer needs have changed significantly.  After the credit crisis we suffered through, trust in the financial system is at an all time low, making people more aware of their money.  Now more than ever, consumers want to know 3 things:

1. Where their money is:  obviously trust in the institution matters, but also how the money is being used (invested) also matters more than ever.   Is my bank using my money to indirectly finance industries that I am morally opposed to?  is my bank investing in esoteric mortgage-backed securities? How can I influence how my money is used? As Don Shaffer from RSF Bank put it: "Consumers have no control of what their money funds at big national banks."
2. What my return is: whether my return is measured as an interest rate, a social impact, or as services and features, more people are now aware of how hard their money is (or should) be working.  Why should I take a measly 0.05% on my checking account? when the bank is turning it around and lending it to people at 5%, 10% and even 20% (as in credit cards)? 
3. What my fees are: free checking and high-yield accounts are now a thing of the past.  Banks are trying to figure out how to make money, and consumers are painfullyaware of this situation as they experience increases in credit card rates, account fees, and other ways banks are lining up to collect more dough.

"It's expensive to be poor with the disappearance of free accounts and other services at your bank." said Ryan Gilbert from BillFloat.  Some consumers are finding out the hard way, realizing they are better off moving their banking to other cheaper online options such as SmartyPig.com, or local banks  and credit unions.   At Lending Club, we have also experienced an influx of funds from investors who prefer to move their "idle money" into investments in consumer credit (personal loans) and obtain a higher, steady return instead.

Other consumer trends that will impact how we bank? Definitely! Everyone seemed to agree that in an age of hyper connectivity, social networking, and real time lifestyles, banking and financial services are changing for the better, and it will be very, very different in the future.  It already has evolved significantly, if you count how mobile, online banking, and the evolution of personal finance management, credit score management (i.e. CreditKarma.com) and investing tools.  Al these innovations have changed the way we manage and invest our money.

So one thing is for sure: change is happening in the banking industry, and there is no turning back.

Money Will Be Mobile, Virtual
Paul Blythe of Microplace jokingly said "Who uses cash? Primarily, criminals!".  The same way we have seen a move from cash to credit, debit and gift cards, we will see an even more rapid adoption of "mobile money".   Take the example of gift cards becoming obsolete: according to PlasticJungle's Bruce Bower , "most people are motivated to redeem cards within a week, but remaining balances are often forgotten.  Mobile will increase redemption".

In this next year, we should also start seeing more trials of technology that allows account holders to "swipe" their mobile phones at points-of-sale.  Bank of America seems to want to jump in on the technology first with this interesting mobile payment technology test.

Other interesting experiments in this area are the Starbucks Mobile Payment card and mobile credit card payment gadget Square.

Digital money will be even more pervasive in the global economy, as citizens of third world countries are starting to adopt mobile as the de facto standard of carrying and transacting money.  This is a tangible and real way the unbanked and underbanked are gaining access to financial services: with a phone.   Carol Realini of Obopay cited the example of Kenya as the world's most developed mobile payment market, where mobile payments  equal 20% of all commerce, at a whopping $33 average transaction.

Personally, I certainly hope mobile becomes a more prevalent form of payment, perhaps kill the debit card altogether in the distant future.  One thing did seem funny to me: I still had to use cash to pay for lunch and later get a drink at the cocktail reception after the event.  Ironic, isn't it?

Projects and Financial Products Will Be Crowdfunded
Long are the days when people had to knock on doors or send mail to get a project funded.  Collecting money, be it for a non-for-profit organization, starting a business, or other more selfish endeavors, has seen a dramatic change in the last three years with the help of social networking, online based microfinance, crowdfunding, and peer lending.  Even venture capital is currently being raised online.  Lending Club was mentioned in several panels as an example of a new kind of trust building financial institution that uses transparency and simplicity as core to its model.   Try that at your favorite bank.

For example, to get a personal loan, consumers had only 2 options until recently: knock at their bank's door, or ask friends and family.  Now, companies like Lending Club have made a financial product such as a personal loan available at lower rates by allowing other individuals to fund those loans.  In the UK, this concept has had so much success with Zopa pioneering the space, followed by a handful of other companies (ratesetter.com, yes-secure.com, quackle.com) that the media hails it a true challenge to tight-fisted banks.

Danae at IndieGoGo spoke about the establishment of online money-collection as the most efficient way to raise capital, while Jessica Jackley of ProFounder talked about how entrepreneurs will soon have more options to fund their businesses.  AppBackr debuted their model to get mobile apps funded and distributed leveraging the VC funding wisdom of the crowd.  Even the "future of angel investing is all in the cloud", said David Rose of New York Angels.  Crowdfunding eliminates the middle man, creating efficiencies and benefiting both sides of the transaction.  As crowdfunding models mature, we'll see more institutional money and even banks jumping in to invest some of the cash they have sitting around.

Financial Decisions Will Be Information Driven, Made with Social Input
Yes, I did say it during my panel: "The last taboo topic on Facebook is money.  People still feel more comfortable sharing about their sex life than their checkbook on social media".  It is true, how many of your friends have you shrugged your shoulders on thinking: "Did you really have to share that?, where is the dislike button?" But I bet you have never said: "Hmmm, let me help my friend X with her CD  or financial question".  This is not about to change, folks.  Money is a difficult topic to discuss in public.  You don't share your money decisions with your close friends over dinner, why would you go on Facebook to do so?  However, social networking and social media serve as message augmentation and sharing of good news.  Since many of the new financial products are smartly integrating social media as part of their communication strategies, they have the potential of faster adoption and "sharing" among friends, family and even strangers.

Another clear trend is aggregation and visualization of financial data: aggregate data from social networks and money transactions will play a central role in financial decision.  This is already happening to certain extend in places like Mint.com, CreditSesame.com and ReadyForZero.com, where better data visualization of your money and credit situation helps consumers make smarter decisions.   User Experience will become an integral part of managing one's finances, as real time engagement banking will be more expected by consumers.  BankSimple, ING Direct and CBW Bank are examples of new financial organizations that get this concept better than the big banks.

Will we see Facebook become a bank? I don't think so, but social media will most definitely play an important role in the evolution of banking and financial services.

Back End Will Still Be Dominated by the Banks

Antonio Benjamin, Global CTO at Citi Group, painfully reminded the crowd during his conference closing remarks that most innovation in the last few years still depends of the core banking infrastructure.   He instilled some hope when he stated that his "personal aspiration is for Citi to provide entrepreneurs access to the banking infrastructure, including global payment network".  Still to be seen if a major bank would do something that bold.  During a couple of sessions, people got really excited about progress made in the last year to make the banking infrastructure more open and distributed, but the fact of the matter is that regulation and central governance seems to impede significant progress in this area.  It's still to be seen how much advancements in technologies will help the core banking infrastructure advance its centuries old core.  Open source currency? distributed virtual economies? alternative payment systems? I'll give all that a big TBD.

What do you think the future holds for banking?

Drop us a comment below and tell us what you think: how will you see the banking and financial industry evolving? What features or products are you more willing to adopt?  What emerging changes in consumer behavior or attitude will shape up how we use and manage our money?

@RobGarciaSJ

This guest post was written by Henry Truc from Go Banking Rates, a website that brings you informative personal finance content and helpful tools, as well as the best interest rates on financial services nationwide. Follow them on Twitter at @Henrytalksmoney and @GoBankingRates.

If you've ever had a credit card, you've probably been told that one of the worst things you can do is to just pay the minimum balance each month. Making only the credit card minimum payment means you're sometimes paying twice or even three times as much for your purchases over a longer period of time.

From a practical standpoint, focusing on only the minimum monthly payment doesn't make much sense. If you have the cash, chances are you're not going to find an investment that will match the interest rate you're being charged on your debt, at least without taking on significant risks. If you don't have the cash, well, you really shouldn't be spending that much on your credit card in the first place and should be finding ways to pay off that debt as soon as possible.

Any way you slice it, there are only a few instances where it should be acceptable to pay only the minimum balance on your credit card. Here are some of the few situations when it's okay.

When to Pay the Credit Card Minimum Balance

In a perfect world, no one would have any debt and everyone would be able to cover everything with cash. In reality, though, there are times when carrying a balance just can't be avoided or actually is the better option.

• Emergency Savings: One of the worst situations is finding yourself with little or no money in your savings account--not spending money, but money stashed away in case of an emergency when your credit card just won't do. If you need time to build up your cash reserves, it may make sense to just pay the minimum for a short while or consider the risks of using your credit card as your emergency fund.
• Costlier Debt: Credit card balances are only one form of debt. You may have other personal loans, student loans, auto loans, a mortgage or maybe even another credit card that charges you a higher rate on your balance. Focusing on paying down debt with the highest interest rates first could mean having to pay only the minimum on some cheaper debt for the time being.
• No Interest Periods: If you have a credit card with a 0% APR introductory period, then you have more flexibility on when you have to pay it off. Keep in mind, however, just because you're not getting charged for the money you owe doesn't mean you should be carrying a balance. You'd be surprised how quickly the amount you owe can spiral out of control, not to mention once the intro period is over rates usually get jacked sky high.
• Investment Opportunities: This situation will probably never happen, but in some once-in-a-lifetime type of circumstances where you find an opportunity to take advantage of an investment with a return that outpaces your credit card interest, it may be acceptable to allocate your cash away from paying down debt to capitalize it. However, finding a risk-free investment is hard enough as it is, let alone one that produces such an attractive return.

Again, there are very few instances where only paying the minimum balance on your credit card is acceptable. The reason is because minimum payments are only a short-term solution to tide you over while you figure out your finances. Being debt-free is one of the major foundations of improving your financial management, so make sure that's what you're focused on.

You can even find more efficient methods to paying down your balance if you're juggling multiple types of loan payments. Maybe consolidating them under a personal loan or trying out a peer-to-peer (P2P) personal loan can help to eliminate situations where you feel that you can only pay the minimum.