Finance & Career
According to the National Retail Federation, holiday spending on gifts, decorations, and food is expected to be only $50 less in 2020 than the previous year, despite the COVID-19 pandemic and the high unemployment rate. After the holidays, many consumers will find themselves spending 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, do not forget to include financial well-being as part of the New Year’s resolutions.
The Consumer Financial Protection Bureau defines financial well-being as
- Having control over personal finances.
- Having the ability to absorb unexpected financial events.
- Staying on track to meet financial goals.
- Enjoying the financial freedom to make decisions that impact one’s life.
Financial well-being is also associated with physical, mental, and emotional health. When struggling with financial problems, individuals are more likely to be stressed or shamed due to money worries such as holiday debt. Worrying about money can cause mental health issues such as anxiety or depression.
Consider these solutions to improve personal financial well-being.
Live Within Your Means
When the amount of money spent each month is less than or equal to the amount of money made each month, one is “living within their means.” To live within an individual’s means will require one to avoid the following:
- “keeping up with the Joneses” or making purchases on what others purchased or obtained
- satisfying wants and forgoing needs
- spending excessively
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 gain control of spending habits. Don’t just develop a spending plan for the sake of developing it. Follow the plan.
Manage Your Credit and Debt
Explore ways to reduce or eliminate debt. Consider using a debt elimination software or learn about the advantages and disadvantages of different strategies one can apply to reduce debt. Also, remember to keep credit card debt 30 percent or less of the total credit card limit because debt impacts credit scores.
Plan for the Unexpected
Save for emergencies. Although various types of emergencies will occur throughout the year, start thinking about the possibility of a major emergency such as loss of employment. The amount of money saved each month should be based on total monthly expenses (see spending plan). A single individual should save enough to cover expenses for at least three months. A family should save enough to cover six months of expenses.
Change Your Behavior
Talking about having financial security and financial freedom will not increase financial well-being. Resolve to change spending behavior and start doing something to secure the financial future.
Remember, it isn’t necessary to be a financial expert to improve financial well-being. It takes desire and commitment. Visit www.aces.edu for more financial management tips.