ALABAMA A&M UNIVERSITY, Ala. – 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.
What is Financial Well-Being?
The Consumer Financial Protection Bureau defines financial well-being as being able to:
- control finances
- absorb the cost of unexpected financial events
- meet financial goals
- enjoy the financial freedom to make decisions that impact a person’s life
Financial well-being is also associated with physical, mental and emotional health. Worrying about money can lead to anxiety or depression. People should consider the following tips to improve their financial well-being.
Living Within Financial Means
People live within their means when the amount of money they spend each month is less than or equal to the amount of money they bring home each month. People can avoid the temptation to keep up with the Joneses by satisfying needs, forgoing wants and avoiding excessive spending.
Create and Follow a Spending Plan
A spending plan or budget will help people control their spending. Celvia Stovall, an Alabama Extension associate director and author of Financial Facts for Females, said people should not develop a plan just for the sake of developing it.
“Once a spending plan is developed, use it faithfully,” Stovall said. “It is your road map to financial success and provides a clear picture of actual and expected spending. It will also let you know when spending adjustments are needed.”
Manage Credit and Debt
Explore different ways to manage, reduce or even eliminate debt. Consider using a debt elimination software or try learning the advantages and disadvantages of different strategies to reduce debt. People should also keep credit card debt 30 percent or less of their total credit card limit because debt impacts credit scores.
Plan for the Unexpected
It is always a great idea to set aside money for unexpected emergencies. Although there are various types of emergencies that occur throughout the year, start thinking about the possibility of a major emergency such as loss of employment. The amount of money a person saves should be based on their total monthly expenses that are in their 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.
Simply talking about having financial security will not improve financial well-being. People must resolve to change their behavior and start doing something to secure their financial future. Remember, people don’t have to be a financial expert to improve their financial well-being. It simply takes desire and commitment.
Fore more information on financial well-being or other financial management tips, visit www.aces.edu or contact your county Extension office.