Financial well-being can be improved by seeking trustworthy advice and having an action plan to develop a working spending plan, set up a simple savings plan, and understand how to get on track to pay off debts.
It’s especially helpful for people facing financial hardship during these challenging times to learn some tried and true strategies, from sticking to a budget or setting a spending limit, to prioritizing finances and paying their obligations, to utilizing credit cards wisely.
What’s the best way to improve one’s financial literacy?
Being informed about finances is crucial to a healthy financial future, and that information should come from reliable sources, like the Consumer Financial Protection Bureau.
The National Foundation for Credit Counseling, the nation’s largest nonprofit financial counseling organization, is an excellent source of information to increase financial literacy. Additionally, counselors who are certified by HUD can provide education and resources for homeowners and renters.
It’s possible to find many informative articles, webinars, and learning experiences on the internet geared toward empowering financial wellness and literacy. the five factors that go into a person’s credit score, so people have the knowledge to improve their financial situation. People can work through online learning experiences and other educational resources to help them understand issues around topics including managing student loans, housing financing (such as forbearance and avoiding foreclosure), and how to use credit cards wisely.
What role does managing credit play in a person’s financial wellness?
After working with our clients across the decades, we have seen that building healthy habits around credit and debt is directly related to empowering financial wellness.
A few of those healthy habits include:
- It is important to pull credit reports that contain accurate and up to date information on your credit history and score.
- People with a good credit score get lower interest rates on their loans such as car loans or mortgages.
- To understand what is being reported to them, our clients should pull their credit report regularly, and if necessary to make sure there are no errors. Annualcreditreport.com now offers news reports on the pandemic every week.
- Talking to a credit counselor will give a person who is looking to improve their credit score, and perhaps is facing hardship, insight and information to understand their options.
- A person’s credit is only a part of the picture when it comes to their financial wellness. Our counselors help them look at their total financial situation, observe spending habits, explore different options, and create a personalized plan.
What first steps can one take to manage credit challenges before they get out of hand?
Many people who are struggling with debt are not alone. Many people may have been forced to use credit cards to pay their bills during this unprecedented time, and now wonder how it has impacted their overall financial situation. It is very important to be aware of the situation as a first step.
We suggest people review these five questions about their specific situation.
People can identify the areas they need to address first by asking these simple, but sometimes challenging questions.
- Are you unsure of the amount of debt you owe to lenders?
- Knowing the total amount of debt a person owes and their debt-to-income ratio can be telling.
- Getting a clear picture of how much debt people have as they look to manage control your financial future debt during the ongoing pandemic is the first step in creating a sustainable plan for financial wellness.
- Do you pay only the minimum monthly payment?
- Credit card statements usually include a table outlining how long it will take to pay off the debt. Seeing in print that it will take 10 to 15 years to pay off debt can be very stressful.
- Each individual’s situation is unique, but this could also be a sign that people need to plan for a higher payment than the minimum.
- Do you take credit card cash advances to help pay bills?
- A cash advance from a credit card can be a very tempting “quick fix” when one faces financial uncertainty, especially in an emergency situation such as an income loss or other emergency financial situation.
- You must also remember that cash advances have a much higher annual percentage rate (APR) than standard purchases. This can add a lot to the cost of borrowing, increasing the difficulty to pay it off in the long run.
- Once again, this could be a signal that someone is in need of guidance and a tailored plan to address their particular situation.