Finance & Career
On average, many Americans spent a great deal of money during the holiday season. In fact, in November, USA Today estimated Americans would spend nearly $1,050 on the holidays in 2019. This leaves many consumers spending several months paying off credit card debt. While the beginning of a new year is often a time to make resolutions to improve overall well-being, people should remember to improve their financial well-being as well.
The Consumer Financial Protection Bureau (2019) defines financial well-being as:
- Having control over your finances.
- Having the ability to absorb unexpected financial events.
- Staying on track to meet your financial goals.
- Enjoying the financial freedom to make decisions that impact your life.
Financial well-being is also associated with physical, mental and emotional health. When struggling with financial problems, you are more likely to be stressed or shamed due to money worries such as holiday debt. Worrying about money can cause mental health stressors such as anxiety or depression.
Consider these solutions to improve your financial well-being.
Live Within Your Means
When the amount of money you spend each month is less than or equal to the amount of money you make each month, you are “living within your means.” To live within your means will require you to avoid “keeping up with the Joneses”, satisfying needs and forgoing wants, and avoiding excessive spending.
Create and Follow a Spending Plan
As with any plan, a spending plan (budget) is used to achieve a specific objective. The objective of the spending plan is to help you control your spending. Don’t just develop a spending plan for the sake of developing it.
Manage Your Credit and Debt
Explore ways to reduce or eliminate debt. Consider using a debt elimination or learn about the advantages and disadvantages of different strategies you can apply to reduce debt. Remember to keep your credit card debt 30% or less of your total credit card limit because debt impacts your credit score.
Plan for the Unexpected
Save for emergencies. Although there are various types of emergencies that will occur throughout the year, start thinking about the possibility of a major emergency such as loss of employment. The amount of money you should save should be based on your total monthly expenses (see your spending plan). A single individual should save enough to cover expenses for at least 3 months. A family should save enough to cover 6 months of expenses.
Change Your Behavior
Simply talking about having financial security and financial freedom will not increase your financial well-being. Resolve to change your behavior and start doing something to secure your financial future.
Remember, you don’t have to be a financial expert to improve your financial well-being. It simply takes desire and commitment. Visit www.aces.edu for more financial management tips.