As we approach the end of the year, consider these actions to help create the foundation for financial success in 2022:
- Review spending for the year. Comparing your actual spending with budgeted amounts will help you plan spending for the coming year. For the upcoming year, track spending with an app, spreadsheet file, Google doc, or a written record.
- Use flexible spending account funds. Be sure to spend any money in a flexible spending account on qualified medical expenses before the end of the year, or those funds might be lost. However, due to COVID-19, you may be allowed to roll over the full balance into next year. Contact your benefits department to see if you qualify.
- Donate to charity. This will not only create a tax saving, but will also help people in your community and around the world.
- Create a backup plan. Review the beneficiaries on your financial accounts. You should have a durable power of attorney to handle your financial activities if you are not able to do so. A health-care proxy (power of attorney) is someone to speak on your behalf regarding medical care when you are not able to do so. A will sets how your assets will be distributed after you die.
- Consider increased retirement contributions. With increased limits for 2022, plan to increase the amount set aside for long-term financial security while reducing current taxes.
- Conduct a life audit. Start with identifying your short-term and long-term goals with sticky notes or index cards. Then, sort your goals by category, such as personal development, work/career, financial, travel, family, community service, and health. Next, organize within a category based on time of accomplishment, which might include: now/soon, always/everyday, later this year, the next year or two, and someday. Take photos of your notes, place them in a visible location, or use an app such as OneNote as a reminder of these targets. Finally, reflect on your goals by determining why you have certain goals and what actions you need to take. Be sure to set deadlines. Also consider how your goals relate to the type of life you desire for yourself. Do your goals reflect your beliefs, values, work situation, and personal relationships?
For additional information on year-end financial planning, click here.
- Have students talk to others about recommended financial actions to take before the end of the year.
- Have students create an action plan and timeline for a specific goal.
- What attitudes, behaviors, and circumstances might restrict a person from taking certain year-end actions?
- Describe information sources and personal contacts that might be used to obtain guidance for achieving a specific goal.
Based on recent research, findings comparing the financial habits of women and men include:
- Overall, single men outspend women, which may be due to higher average earnings. Men spend more on food and transportation, while women have higher spending for clothing. Both groups have similar spending for entertainment.
- Women are wiser shoppers, buying items on sale and using coupons more often than men.
- For debt, including credit cards, student loans, auto loans, personal loans, home equity lines of credit, and mortgages, men have more debt than women.
- For both groups, the main financial goals were saving for a vacation, paying off credit card debt, and improving their credit score.
- As they near retirement, men had higher amounts in their retirement funds. However, women are more likely to participate in an employer retirement plan than men, and save a greater percentage from their paychecks.
For additional information on the money habits of women and men, go to:
- Have students create a short survey to compare the spending, saving, and investing activities of women and men.
- Have students create a visual proposal (poster or slide presentation) to suggest improved money management activities.
- What factors might affect differences between the money management activities of women and men?
- Describe actions a person might take to improve money management activities.
MoneyLion offers a low-cost financial service tool that integrates investing, banking, lending, and financial wellness. Using the brand name RoarMoney, the company also offers a virtual debit card for contactless payments and Instacash with a free overdraft service. With Money Lion’s Shake N’ Bank program, customers earn cash every time they spend $10 or more with their bank card. To determine the amount they get back, users literally shake their phones and a random amount up to $120 shows up.
To guide financial wellness, the Financial Heartbeat program of MoneyLion rates customers from 1 to 10 on these categories:
1) Save measures financial preparedness; how well a person can pay expected and unexpected expenses.
2) Spend measures purchasing in relation income available.
3) Shield determines how well you understand and organize your insurance needs and coverages.
4) Score creates a Bottom of Formcredit score to assess overall credit health based on debt usage and interest rates paid.
For additional information on FinTech and financial wellness, click here.
- Have students talk to others to learn about the features of banking and money management apps they have used.
- Have students create a visual proposal (poster or slide presentation) for an app that would help people better manage their money and improve their financial wellness.
- What features of an app or FinTech product might help people improve their financial wellness?
- Describe actions a person might take to evaluate an app or FinTech product.
While keeping a close eye on spending is vital for financial security, few people enjoy doing so. Several creative approaches for effective budgeting and money management are available.
- The 70% Rule is percentage-based with 70 percent of income for necessary expenses. Followed by 20 percent going into savings by using automated direct deposit. The other 10 percent is for retirement and investing for future financial security. The 70% Rule is useful for those with saving as a priority, and want a simple budgeting method.
- The 50/30/20 Rule is a variation of the 70% Rule, with three categories. First, 50 percent of your income goes toward necessities. Then, 20 percent is for financial goals, such retirement or paying off debt. The remaining 30 percent can be spent as desired. This approach may not work for many people, but can be a good starting point for successful money management.
- Budget by Paycheck uses a calendar to track income and expenses. Color code your paycheck, expenses, and extra money to assign a bill payment to a paycheck on a calendar. Any “extra” money should be given a “job,” such as savings, debt repayment, or fun. This approach is useful if you desire structure and like having a visual tool.
- Envelope Budgeting is a traditional method with labeled envelopes to identify expense categories. Cash for the budgeted amount is put into each envelope. You only spend the amount in an envelope, which provides strong control of your spending. Instead of cash, you may use a card or envelope to record the amount spent for each category to stay within your limit. Several budgeting apps are also available with visual envelopes to monitor spending.
- Gift-card Budgeting manages your money by dividing your spending into categories and loading the amount onto a phone gift card. This system is similar to traditional envelope budgeting. Determine the amounts for various spending and saving categories. Then, buy gift cards for each category, such as a food store card for groceries, which will limit your spending for each budget item. With gift cards on your phone, you will always have them with you and will know the balances. Buying gift cards at moola.com can result in special deals and bonuses.
- You Need a Budget (YNAB) is a software system and app featuring partner budgeting, goal tracking, personal support, and secure data. YNAB emphasizes these principles: every dollar is assigned a category; large expense items are broken into manageable amounts; budget flexibility when situations change; and planning for the future, without scrambling for today. The personalized support and online YNAB community discussions, included in the cost of the software, prepare you for successful budgeting on your own.
- Kakeibo, pronounced “kah-keh-boh” and translates as “household financial ledger,” is used in Japan to manage personal finances. This method emphasizes recording financial activities with physical writing (no apps or computer), and uses four categories: (1) needs, (2) wants, (3) culture, such as books and museum visits, and (4) unexpected, for medical expenses or car repairs. Then, you reflect on these questions: How much do I have available? How much would I like to save? How much am I spending? How can I improve? Kakeibo may not control your spending but it can make you more mindful of how you spend money.
- Zero-based Budgeting gives every dollar a specific task for spending, saving, or investing. This method encourages you to create a revised budget each month based on changes in income or expenses, which provides financial flexibility. This system may not be useful for people with irregular incomes.
- Value-based Budgeting involves allocating income based on importance (value) to you rather than budget categories. While some items need to be paid (housing, food), how much you spend on these items depends on how much you value them. If eating out is a priority, your food budget will be higher than for someone who eats mainly at home. This approach can help you stay within your budget since you created the spending plan based on personal preferences. Beware that saving for a goal might be a low priority but should probably receive stronger recognition.
- Pay Yourself First Budget is simple and emphasizes your financial future. Based on the amount earned, determine how much you want to save. The remaining amount is divided among necessary expenses and other spending. The process can be awkward when a conflict exists between income available and a desire to save a large amount. Many people combine this method with other budget systems to ensure coverage of needed living costs.
Other actions that can make budgeting fun include:
- Money Nicknames. By naming your bank accounts and budget categories with creative names can create a fun attitude and personalized connection for money management activities. Also, use a Sharpie to label your debit and credit cards with a name or a specific use, such as “Hey, bills only!” or “Treat yourself today.”
- Bae Day involves setting aside a specific time, usually on payday, to review your budget and plan your spending. Bae, which stands for “before anything else,” involves a self-appointment to take action before anything else happens to your money. You can make Bae Day fun by dressing up for this self-care occasion, going to a special location, or playing favorite music.
- Money Mate Date helps achieve accountability related to finances. Your Money Mate will keep you in line for financial activities. The relation can involve a quick call to make sure that monthly bills are paid, or an emergency text to avoid impulse buying.
- Arts and Crafts. Create, or locate online, a poster to visually view progress on savings or debt reduction. Color in the poster little by little as you save or pay down student loans. Also consider using photos to represent budget categories or financial goals for more motivating money management activities.
For additional information on creative budgeting ideas, here are some links to click on:
- Have students talk to others for information about budgeting actions that have been successful.
- Have students create a video, poster, or other visual with ideas for creative budgeting activities.
- What are reasons people are unable or unwilling to practice successful budgeting?
- Describe the actions a person might take for effective budgeting.
A mother or father raising children without assistance from a partner can create financial difficulties. To avoid fear, frustration, and anger, consider these actions:
- Assess your situation. Determine your monthly after-tax income, monthly bills, money in savings, and money saved for retirement. Knowing these amounts will provide a starting point and foundation of where you need to go.
- Cut unnecessary spending through wiser shopping, lower household expenses, and not buying certain items that you can do without.
- Plan for additional income. Consider your current work situation, a new job, a raise or promotion, overtime pay, a second, part-time job, freelance work, or items that you might sell.
- Seek extra income sources. Additional income can result from skills and interests you may overlook. Consider new job training, or starting your own business. More income will also mean additional savings for financial goals.
- Create an emergency fund. To be ready for financial struggles (job loss, home or car repairs, medical expenses), have a cash cushion to cover three to six months of expenses.
- Save for retirement. Additional amounts might be needed for long-term financial security if you had to split retirement funds with an ex-spouse or partner. Budget a monthly amount for your retirement fund.
You may feel overwhelmed at times, but don’t get discouraged. Start saving a small amount, such as one percent of your income for emergencies and one percent (or more) for retirement. Then in a few months, increase the percent of income you are saving.
Continually track your spending, and review your budget and financial goals. This action is especially vital if you are self-employed with a fluctuating income. Save more in higher-income months to be ready for lower-income months.
Also, lower your expectations to match the reality of your income situation and household needs. Finally, make a commitment to work hard, not give up, and support your children, emotionally and physically.
For additional information on single parent money management, click here.
- Have students talk to single parents for additional financial suggestions.
- Have students create a plan for specific money management actions for single parents.
- What are reasons that single parents might encounter financial difficulties?
- Describe shopping and income actions a single parent might take to reduce spending and increase income.
- Nearly half of U.S. adults have reported that their mental health has been negatively impacted due to worry and stress over the virus, according to a Kaiser Family Foundation poll.
- A new NFCC survey finds situations that immensely exacerbate financial worries include not having enough savings, losing a job and the inability to pay debts.
- Many large health insurance companies as well as Medicare have increased their capacity and coverage for telehealth visits with mental health providers.
Here are some tips from the mental health and financial experts on how best to cope with these common money stressors.
1. Not enough savings
If you find yourself struggling financially and have a limited emergency fund — or none at all — focus instead on what you can control. “First, carefully examine your expenses and reprioritize your spending. Cut out everything but the essentials , such as, mortgage or rent, food, utilities and insurance,” said author and certified financial planner Carrie Schwab-Pomerantz, who is also president of the Charles Schwab Foundation. “If you’re unable to pay a bill, contact your creditors right away. They may be willing to negotiate a payment schedule or waive late fees.
2. Job loss
If you haven’t already, file for unemployment benefits immediately through your state’s program. There will likely be a lag time until you receive your first check.
- Make sure you still have health insurance. You could switch to COBRA to receive the same coverage you had under your employer for the next 18 months, but you have to pay for it yourself at a considerably higher cost than you were paying as an employee. “Do some comparison-shopping.”
- Consider other jobs that you may be able to pursue. Use your down time to learn a new skill or start that side-hustle. Education, health care, and technology companies are among some of the industries hiring remote workers right now.
3. Inability to pay your debts
Nearly half of U.S. adults currently have credit card debt and 13% of them are not paying anything at all or don’t have a plan on how to pay, according to a report by CreditCards.com.
Consider temporarily paying only the minimum on mortgage/rent, car loans and student loans as well, said Schwab-Pomerantz, whose Schwab MoneyWise website has a list of resources to help during the Covid-19 crisis. More help could be available. You may be able to lower or suspend your mortgage payments for up to one year in some cases. Contact your lender. If you’re having trouble paying your rent, talk to your landlord about your situation and your options. Some states and municipalities are providing eviction restrictions for impacted individuals. Many utilities and phone companies have stopped cutting off services for nonpayment. Call them.
For more information, click here.
- Ask students how the corona virus has affected them, their relatives, or friends. What steps have they taken to minimize the effects of the corona virus?
- List the steps to take if you don’t have enough emergency funds to get through this financial difficult period.
- How are millions of Americans coping with stress and anxiety as they deal with the fear and reality of death and disease due to the corona virus pandemic?
- Discuss the economic and emotional worries that are keeping American awake at night.
While no one plans to lose their wallet, you can reduce the trauma of that event. Consumer protection experts recommend not
keeping these items in your wallet:
- your Social Security card; also make sure nothing else in your wallet contains your Social Security number.
- a list of passwords; keep the list secured at home, and consider use of a password manager.
- spare keys; a lost wallet with keys and your home address on an ID card is an invitation to burglars.
- blank checks; while few people write checks, blank checks are risky as a thief has your account number and the bank routing numbers and probably your home address.
- your passport or passport card; an identity thief could travel under your name, obtain a copy of your Social Security card, or open a bank account. Whenever traveling on a passport, keep a copy in a safe place.
- extra credit cards; carry only one or two cards to avoid having to cancel many cards if your wallet is lost or stolen.
- other items to keep out of your wallet: birth certificate; receipts that could be used to by skilled identity thieves; an old Medicare card with your Social Security number; and gift cards, which could be used by anyone with access to your wallet.
By following these guidelines, you can avoid identity theft, bogus loan applications in your name, and someone opening fraudulent accounts. Also recommended: photocopy the front and back of the items in your wallet to have a record of what is lost or stolen.
For additional information on what not to keep in your wallet, click here:
- Have students talk to others to determine if they carry any of these items in their wallet.
- Have students create a checklist of action to take if your wallet is lost or stolen.
- What are actions people can take to avoid identity theft?
- Describe how technology and apps are replacing traditional wallets. Discuss how these devices might improve security against identity theft.
During difficult times, as well as in other times, saving money is difficult. While high-tech and app methods may work, traditional actions can result in quickly increasing your wealth. These weird-sounding saving habits suggested by millennials include:
- Save a certain denomination of money. People who get paid in cash or receive change suggest saving every five-dollar bill, for example, in an envelope. This money can be used for fun activities, a special dinner, or to add to your long-term savings.
- Use a jar to control spending. Put a set amount of cash in a decorated jar for lunches, eating out, or other budget item. Having to actually pull money out of the jar will make you more cautious of your spending habits.
- Skip buying certain items. Avoid coffee, soft drinks, snacks, or other impulse items, and save that amount. These small amounts can add up to larger sums saved.
- Make use of recurring payments. If you are paying each month for a car payment, when the vehicle is paid off, keep sending that amount into a savings account.
- Save in short sprints. For one month, avoid eating away from home and bring lunch to work. This reduced spending can make you more aware of your spending habits and increase amounts saved.
- Pay for your drinks (or snacks) at home. Every time you have a soft drink, other drink, or snack, “pay” for it be setting aside the “price,” such as $1 for a soft drink or $2 for a bag of chips. These funds will add up for your savings.
- Visualize your savings goal. Display a photo or other visual as a reminder of items you plan to buy or when saving for holiday gifts or a vacation.
- Actually, freeze your credit card. Place your credit card in a bag or container of water and place it in the freezer. This action can help avoid impulse purchases, and you can easily defrost it under warm water when you need to pay for an emergency.
For additional information on unusual money actions, click here.
- Have students talk with others to obtain other ideas that they use to save money.
- Have students create a video or other visual that might be used to encourage people to spend less and save more.
- Why do most people have a difficult time saving money?
- Describe personal action that you have used to spend less and save more.
The finances of many people have been greatly affected by the COVID-19 pandemic. Some of these recent financial situations are:
- Large numbers of households lacked an emergency fund, and were not prepared for unexpected financial difficulties.
- People who encountered difficulties making their mortgage and rent payments were offered relief and protection options to avoid losing their place of residence.
- Monthly payments and interest on student loans were suspended until a later date.
- Consumers lost nearly $80 million as a result of coronavirus-related fraud. Some common scams were offers to receive stimulus checks sooner, fraudulent unemployment claims, threats of utility shutoffs, online shopping and price gouging for high-demand products such as sanitizer and paper goods.
- COVID-19 surcharges were added by some businesses and restaurants to cover increased cleaning, sanitation, and food costs. Some dentist offices added an “infectious disease” or a “personal protective equipment” charge.
- A coin shortage resulted from banks and coin-heavy businesses being closed, lower U.S. Mint production, and increased contactless payments. To adapt, stores gave store credit or a free drink or chips when coins were not available for correct change.
For our current and future times of crisis, these money management suggestions are offered:
- Learn about federal, state, and local government assistance programs.
- Reassess and review your budgeting priorities.
- Reduce and avoid debt; contact creditors to discuss revised payment plans.
- Start to rebuild your savings cushion.
- Use online tools for managing finances and to automate savings and payments.
- Increase your awareness of possible frauds and scams.
For additional information on managing money during COVID and future times of crisis, go to:
- Have students talk to others about the financial difficulties and actions taken in recent months.
- Have students create a video with suggested actions that a person might take when facing financial difficulties.
- What are reasons that people might not prepare for unexpected financial difficulties?
- Describe actions you might take to prepare for unexpected financial difficulties.
Most every organization uses metrics to determine success. Also referred to as key performance indicators (KPIs), these numeric measurements can be used to assess financial success and progress toward goals. When selecting personal financial KPIs, be sure to: (1) identify what’s important to you for your financial goals; (2) create a system to track your progress, in writing, with a computer file, or an app; (3) involve all household members in the decision process.
Some common KPIs you might consider monitoring include:
- Credit score, which is affected by missed debt payments and involves your ability to access loans in the future.
- Savings rate is vital for future major purchases and planning for retirement. Financial advisors recommend saving 10-15 percent of your income.
- Discretionary spending measures a person’s level of expenses related to meals out, fancy clothes, vacations, and other non-necessities, so money can be saved for more important goals.
- Net worth (total assets minus total liabilities) measures financial health progress, which can increase by paying off debts and increasing saving and investing.
More creative KPIs are available for advanced personal financial planning. The Financial Health Index combines several financial metrics to provide a measure of overall financial health. The Financial Independence Number indicates the amount of money needed to live off the investment returns of your net worth. Living Within Means Index measures if necessary expenses are covered by a person’s income.
For additional information on KPIs for personal finance, go to:
- Have students create a visual design that might be used to monitor progress for one or more personal finance key performance indicators.
- Have students talk to others about actions they take to monitor their financial progress.
- Refer students to the Road Map/Dashboard feature at the end of each chapter of Personal Finance or Focus on Personal Finance to view additional examples of key performance indicators.
- What are the benefits and limitations of personal finance KPIs?
- What are other KPIs that might be valuable indicators of personal finance success?