BY KEISHA JOHNSON
If you were to have a financial check-up today where would you fall on the spectrum: healthy, in recovery/fragile or chronically impaired? Would you know what to do to attain, maintain or improve your financial well-being?
The Consumer Protection Financial Bureau defines financial well-being as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future and is able to make choices that allow enjoyment of life” (CFPB 2015).
By this definition, such a person for example, should sleep well at night from the relief of not living from paycheck-to-paycheck. They would have minimal money anxiety should they lose their job or income for at least three months to a year. They would be financially free to tackle the things on their bucket list and ‘live a little’ before or in retirement. In essence, they plan, make good decisions and take the requisite actions that allows them to be in control of their finances.
That’s the image I get of someone who is enjoying financial well-being, based on the CFPB’s definition. But how many persons today fit that bill?
An Ipsos Reid poll conducted in early 2016 indicated that a little less than half of Canadians were within $200 per month of being unable to pay for their bills and make their debt payments.
This suggests that many persons within the society have very little financial security, limited flexibility in their finances and limited capacity to absorb any financial shocks. They are barely living within their means, which indicates that their financial well-being is fragile.
As the cost of living increases, more people may have to be turning to credit to pay for day-to-day expenses. But the allure of credit can be lethal to your financial well-being if mismanaged.
To stay within the positive spectrum of financial well-being demands that you develop the acumen and discipline of good financial and credit management and decision making.
A weakness in any of these areas not only threatens your financial security but can generate negative stress that impacts many facets of your life. It can compromise your performance in the workplace, put a strain on families and other social relationships and adversely affect your physical and emotional health.
Research from Employee Financial Well-Being shows that the health of people with high debt stress for example, is more adversely affected than persons with low debt stress as follows: severe anxiety (29% vs. 4%), severe depression (23% vs. 4%), migraines (44% vs 15%), ulcers/digestive track problems (27% vs. 8%), muscle tension (51% vs. 31%) and heart attack (6% vs. 3%).
To get control of your financial well-being, Patricia Giankas, CEO of Score Up, a credit management firm that among other services coaches people to develop and maintain sustainable habits for financial well-being, suggests that whether you are in recovery, maintenance or prevention mode, the first step is to “take action now.” Some of the vital habits to develop for financial well-being she says are:
Set Goals: Make financial goals and develop and implement a plan to achieve them.
Budgeting: Create a weekly budget or review your monthly budget weekly, making sure you are on track with your budget. Research shows that this habit helps to minimize impulse spending and spending above one’s means. A budget will show your spending habits and where you may be able to conserve, redirect funds and save.
Saving: Start saving now. Set up an automatic transfer of money to a savings account regularly.
Manage Credit Cards: Pay your credit card bills BEFORE the actual payment due date. Pay at least the statement minimum plus the transaction fee if that is all you can afford. Aim for a maximum balance of 30-34% of your card limit.
Credit Monitoring: Regularly pull your credit score with TransUnion, using their low cost monthly plan. Their Alert Program helps protect you against identity theft via email notifications when something seems off in your normal use of your cards.
If you are overwhelmed in getting your financial well-being on track, seek the help of a reputable professional, your life could depend on it!