U.S. households are finding it difficult to stay current with their expenses.
The cost of food
increased by over 23% between 2020 and 2024
Other cost increments, notably significant ones for automobiles, insurance, childcare, and accommodation, occur as almost 40% more individuals face these changes.
falling behind on their credit card bills
than in 2022.
Now, uncertainty arising from zigzagging tariffs, firing of tens of thousands of federal workers and contractors, and massive cuts and freezes to federally funded programs means that more people are
growing more cynical regarding economic conditions
.
As an assistant
professor of social work
, I have
found through my research
The variations in individuals’ experiences, attitudes, and behaviors regarding their personal finances exert as significant an influence as age and gender do on specific financial choices. These choices subsequently can shape their future earnings and accumulated wealth.
Improving your ‘financial efficacy’
Scholars such as myself employ the term ”
financial efficacy
” when we’re assessing whether someone has personal finance know-how and the ability to put it to good use. People with a high level of financial efficacy can be more able to weather bouts of financial hardship and build wealth.
Even though each person’s circumstances are distinct and their available resources differ, certain commonalities remain.
five broad areas
According to personal finance specialists, these traits are associated with positive financial results: managing emotions effectively, possessing strong problem-solving abilities, having the capacity to attain objectives, exhibiting self-assurance, and practicing effective risk management.
1. Remaining composed and pressing forward
Staying composed during a possible—or actual—financial crisis usually makes it simpler to ponder crucial choices. Conversely, acting from dread frequently results in errors or hasty solutions that have expensive lasting impacts. For instance, hastily addressing an issue can lead to complications.
might prompt you to get a payday loan
with elevated interest rates and charges.
This is why you should steer clear of major monetary choices when rushed.
Waiting until you’re composed, maybe allowing yourself 24 hours for reflection, might shield you from exacerbating a difficult scenario. However, avoid delaying excessively.
Procrastination may result in late charges.
and compound your problems.
Controlling your emotions relies on maintaining
healthy coping mechanisms
For dealing with stressful situations, maintaining healthy habits can help manage that stress.
2. Addressing problems with a touch of innovation
Tackling monetary issues requires a knack for improv. It involves devising innovative methods to boost earnings via additional employment or freelance gigs, along with cutting down costs. Alternatively, seek out strategies that grant extra breathing room, like arranging a payment schedule for overdue invoices.
This determination and ingenuity frequently involve leveraging skills you’ve utilized previously. Additionally, it could be beneficial to consult with individuals whom you recognize as having made sound fiscal decisions in the past.
When in doubt about how to solve a financial problem, go see a financial counselor or social worker who can help assess your situation and identify the next steps. But be
wary of the so-called finfluencers
– short for financial influencers – who are active on social media. Instead, learn from the experts who focus on
consumer protection and unbiased education
.
3. Setting goals and keeping track of them
Accomplishing objectives can either be a brief endeavor, such as tackling an urgent issue, or a prolonged journey. This involves maintaining a distinct vision of your end result and recognizing when you have achieved said objective. For more intricate targets, they might require division into several checkpoints to ensure progress remains consistent.
Every time you find yourself facing serious money issues, make sure to keep a close eye on your earnings and spending habits. Adjust your budget based on your priorities. Doing so can boost your feeling of being in charge of the circumstances.
Add up all of your debts, such as those from credit cards, cars, student loans, medical or utility bills, and home mortgages. Determine the total amount you owe and identify each creditor. Then create a strategy for paying back these debts. If this seems daunting, that’s perfectly normal.
credit counseling nonprofit
I can assist you with walking through the process.
Writing out all your debts either on paper or using a spreadsheet can lessen feelings of anxiety and fear about the uncertain aspects of financial obligations. Creating this plan enables you to visualize a clear path towards achieving greater fiscal stability. Afterward, begin taking steps to pay off these debts systematically.
An option could be to request from your creditors either an extended due date or a revised payment plan for mortgages or auto loans. By proactively reaching out to them, you demonstrate that you are addressing the situation responsibly, which makes it more probable that they will assist you.
Americans
currently owe an average of $6,455
Facing credit card debt? Settling your balance in full within the grace period rather than paying later with added interest can make a significant difference in the amount you end up owing. Extra savings could be quite useful.
4. Building greater self-assurance via repetition
It’s invariably simpler to feel assured about accomplishing something when you’ve accomplished it previously. That’s how self-assurance accumulates over time.
However, when faced with a novel circumstance, recalling your personal history might be beneficial. Recognize that you have overcome obstacles before, which may lead you to believe that you can manage this one too. This assurance can aid in maintaining composure, contemplating potential resolutions, and understanding that you are capable of attaining your objectives.
Improving your money management confidence and skills
can reduce your anxiety and stress in the moment
. It can show you those areas of your financial life that are within your control and illumine the way forward to a healthier financial future.
5. Planning ahead reduces your risks
Even if your financial situation is good at present, I recommend planning for the future. It’s crucial to recognize your personal circumstances.
informal safety nets
before you need them.
Suppose you needed to make a payment
an unexpected $400 bill
What approach would you take?
Would you consider using money set aside from either a friend or a relative? Is this sum of money readily available for emergencies? Does it factor into your overall income? The Federal Reserve suggests that according to their findings,
Only 63% of Americans would be able to handle a sudden $400 expense.
using the money they currently possess.
By consistently putting away portions of your earnings, you can improve risk management and hone the abilities needed to reach more significant objectives.
Handling your personal financial risks involves striving to stop a difficult circumstance from deteriorating further. Additionally, this could mean averting a potential disaster down the line or being more prepared to manage it effectively.
Owning various types of insurance policies, including life, disability, homeowner’s or renter’s, along with health and automobile coverage, forms one aspect of financial preparedness. Equally important is ensuring you have sufficient savings set aside for emergencies or generating additional sources of income.
The actions you undertake might also encompass something intangible, like looking after your well-being or nurturing your health.
connections with buddies and family members
So you can reach out to them during hard times. Alternatively, they will be ready to come to your aid whenever needed.
Jeffrey Anvari-Clark
Assistant Professor in Social Work
University of North Dakota
The article is being republished from
The Conversation
under a Creative Commons license. Read the
original article
.
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