Despite continuing financial challenges, American consumers believe they can see the light at the end of the economic tunnel according to a new study. The most recent installment of the Western Union® Global Business Payments Money Mindset Index, conducted in Q4 2009, found that 17 percent of consumers believe their financial situation had improved during the past six months (versus 15 percent in Q3 2009) and a full one-third of consumers expect their finances to continue improving in the first half of 2010. Correspondingly, the study found a slight decrease in the number of consumers who reported feeling “stressed” when considering their ability to meet financial obligations (50 percent versus 53 percent in Q3 2009).

This cautious optimism is tempered by continued fallout from the economic crisis. The study revealed a slight increase in the number of consumers reporting the loss of a primary job (15 percent of respondents versus 14 percent in Q3 2009). In addition, more respondents report making late payments on bills such as car loans, child care, credit cards and insurance premiums, resulting in increased late fees and interest charges.

While an increased number of consumers are considering dramatic solutions such as bankruptcy to improve their financial situation, most continue to respond with simple, back-to-basics financial strategies. Survey respondents continued to cut back on spending, cancel non-essential bills or services and increase shopping at discount stores. The vast majority (63 percent) of consumers who have created a budget in the last six months also report that they have been successful at establishing and sticking to their budgets.

“Consumers are slowly growing more confident about their finances,” said David Shapiro, senior vice president, Western Union Global Business Payments. “They’ve seen some success with budgeting and reducing discretionary spending and they are feeling more positive about the future than they were just six months ago.”

At the same time, Shapiro sees an increase in some risky behavior that could negatively impact consumers’ financial futures. The Western Union Global Business Payments Money Mindset Index found that consumers are more willing to dip into long-term assets to cover short-term debt, with 23 percent of those consumers withdrawing from their savings in the last six months stating that they withdrew funds from a 401(k) account and another 16 percent withdrawing funds from a brokerage account, stocks, bonds or mutual funds.

The increase in late payments is also a cause for concern with resulting fees and interest charges making it more difficult to stay within budget and negatively impacting consumer credit records.

“It’s important for consumers to keep their long-term goals in mind,” says Shapiro. “Paying even a few bills late can negatively affect your credit score – something that can impact your ability to finance your future. Dipping into assets at the same time can provide a ‘double-whammy,’ reducing returns on these investments and perhaps putting retirement income in jeopardy. Budgeting will continue to be an important tool for consumers. Used consistently it can allow them to prioritize their finances in a way that supports long-term goals. At the same time, bill-payment strategies like setting up automatic payments or making use of last-minute bill payment options can help to keep that precious credit rating on track.”

Tips from Western Union

- Review Your Budget On A Periodic Basis. Have your circumstances changed? You might find that a reallocation of your budget dollars can have a positive impact on your finances.

- Don’t Neglect Your Emergency Savings Fund. Set up an automatic deposit from your paycheck into your savings account. Even a small amount each month will add up and can help prevent having to dip into long-term assets.

- Pay Your Bills On Time – work with billers to see if you can schedule your payments around your paychecks and make use of last-minute payment methods to avoid late fees and additional charges.

- Take Advantage Of Free Advice. Credible Web sites like bankrate.com, cnnmoney.com and moneycentral.msn.com offer personal finance tips and strategies that can help you keep your financial future heading in the right direction.