Chapter 2

Coping With the Corona Virus-Related Financial Stressors

KEY POINTS

  • 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 programThere 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.

Teaching Suggestions

  • 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.

Discussion Questions

  1. 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?
  2. Discuss the economic and emotional worries that are keeping American awake at night.
Categories: Budget, Chapter 2, Chapter 5, Debt | Tags: , , | Leave a comment

DON’T KEEP THESE THINGS IN YOUR WALLET

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: Teaching Suggestions
  • 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.
Discussion Questions 
  1. What are actions people can take to avoid identity theft?
  2. Describe how technology and apps are replacing traditional wallets. Discuss how these devices might improve security against identity theft.
Categories: Chapter 2, Chapter 4, Identity Theft | Tags: , | Leave a comment

Bizarre Money Habits

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.

Teaching Suggestions

  • 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.

Discussion Questions 

  1. Why do most people have a difficult time saving money?
  2. Describe personal action that you have used to spend less and save more.
Categories: Chapter 1, Chapter 2, Savings | Tags: | Leave a comment

COVID-19 FINANCIAL LESSONS

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:

  1. Learn about federal, state, and local government assistance programs.
  2. Reassess and review your budgeting priorities.
  3. Reduce and avoid debt; contact creditors to discuss revised payment plans.
  4. Start to rebuild your savings cushion.
  5. Use online tools for managing finances and to automate savings and payments.
  6. Increase your awareness of possible frauds and scams.

For additional information on managing money during COVID and future times of crisis, go to:

Link #1

Link #2

Link #3

Teaching Suggestions

  • 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.

Discussion Questions 

  1. What are reasons that people might not prepare for unexpected financial difficulties?
  2. Describe actions you might take to prepare for unexpected financial difficulties.

 

Categories: Chapter 1, Chapter 2, Economy | Tags: , | Leave a comment

PERSONAL FINANCE KPIs

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:

Article #1

Article #2

Teaching Suggestions

  • 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.

Discussion Questions 

  1. What are the benefits and limitations of personal finance KPIs?
  2. What are other KPIs that might be valuable indicators of personal finance success?

 

Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , , | Leave a comment

Financial Literacy for Children

A lifetime of skillful financial decisions starts with experiential learning at a young age. To increase financial literacy for the next generation, consider these actions:

  • Give children a payday. Instead of a weekly allowance with simply giving money, create a system of earning these funds. Connect their household chores to earned amounts with a weekly payday. This practice can teach a child that people are paid for work to earn money for their living expenses.
  • Create awareness of opportunity cost. Every financial decision has trade-offs. Once money is spent, that money is not available for other uses. Keeping money in a clear jar allows the young person to visually see what funds are available, and when the money is gone.
  • Allow children to experience borrowing. If a child wants to buy something but does not have the money, set up a signed loan agreement with repayment terms. Also create a plan for the amount owed to be taken from future household earnings. Have the young person physically pay the money to better understand how credit works.
  • Connect them in the budgeting process. Include children in the discussion of family finances and the household budget to help them understand where money is spent. Consider creating a chart with spending amounts, or use slips of paper representing money that are used to pay the bills each month.
  • Teach wants vs. needs. Shoes or a clothing item may be a need but not a high-fashion version. To cover the cost of the higher-priced item, young people should be required to earn the amount for the additional expense.
  • Use money games. These activities can help children understand earning, saving, wise spending and other basics of money management for a financially sound future.

For additional information on financial literacy for children, click here.

Teaching Suggestions

  • Have students conduct online research to locate other actions used by parents to teach their children smart spending and wise money management.
  • Have students talk to parents to obtain suggestions that might be used to teach wise money management to children.

 Discussion Questions 

  1. What are the financial, social, and relational benefits of children learning smart spending and wise money management early in life?
  2. Describe possible money management learning activities for children that involve creative use of technology.
Categories: Chapter 1, Chapter 2, Chapter 5, Credit Cards, Financial Planning | Tags: , | Leave a comment

Giving A 6-Year-Old A Debit Card to Teach Wise Spending…Really!!

Kids are no longer using a piggy bank to obtain financial responsibility. Instead, digital tools, such as debit cards and apps, are the basis for learning smart spending and wise money management.  Many of these products are prepaid cards that help kids track their spending, and also include customizable oversight features for parents.  Some available products include:

  • FamZoo (famzoo.com) makes use of parent-paid interest to encourage saving. Common users of the app are preteen and young teenagers, but may also be used for kids from preschool to college.
  • Greenlight (greenlightcard.com) allows parents to control the stores at which the debit card can be used. Greenlight plans to introduce an investing feature to move users to a higher level of financial literacy.
  • gohenry (gohenry.com) is an app for kids (ages 8 to 18), but may be used by younger children. The emphasis is on building money management confidence in a safe setting while learning to spend and save.
  • Current (current.com) is a custodial bank account aimed at teenagers. Parents may also open accounts for younger children.

These products allow parents to channel digital funds to their children to pay weekly allowances. Also, kids may divide their money into accounts for saving, spending, and donating to charity.  Most apps have a monthly fee, ranging from $3 to $5.

When using prepaid debit cards with children, consider the following:

  • Spend time talking about why the kids want to buy various items, and why certain household tasks earn money and others do not. Expand the Connect the discussion to talk about total family finances as well as money attitudes and values.
  • Allow freedom to make spending decisions to give kids experience at managing money, and to make mistakes from which they will learn.
  • Ask older kids to buy household items, even though they might be reimbursed. Buying shampoo, toothpaste, and snacks will prepare them for when they are on their own. Also consider billing them for monthly expenses, such as the cost of their cell phone.

For additional information on prepaid debit cards for kids, click here.

Teaching Suggestions

  • Have students conduct online research to evaluate apps that might be used by parents to teach their children smart spending and wise money management.
  • Have students talk to parents to obtain suggestions that might be used to teach wise money management to children.

Discussion Questions 

  1. What are the financial, social, and relational benefits of children learning smart spending and wise money management early in life?
  2. Describe some possible money management learning activities for children that do not involve the use of technology.
Categories: Budget, Chapter 1, Chapter 2, Chapter 4, Financial Services | Tags: , , | Leave a comment

Beware: Subscription Services

With growing numbers of video streaming services and product box programs, these subscriptions are becoming the newest budget buster. These seemingly small monthly charges add up, lowering a person’s ability to save along with a potential for increased debt. These ongoing financial commitments leave people with a lower percentage of free cash flow, or unencumbered income.

Subscription service spending is often overlooked especially when the payments are on auto pilot. A $4 or $8 monthly fee may not seem like much. However, research indicates that subscription services are an increasing financial burden as most people underestimate the amount. In one study, 84 percent of respondents estimated monthly spending on these services at about $80; the actual amount was over $110. In addition to video steaming services, people sign up for automatic monthly shipments of beer, wine, contact lenses, cosmetics, meal kits, pet food, razors, vitamins, and other products.

For additional information on subscription services, click here.

Teaching Suggestions

  • Have students survey several people to determine the types and amounts of subscription services being used.
  • Have students create a financial analysis for amounts saved over several years by reducing or eliminating subscription services.

Discussion Questions 

  1. What factors influence a person’s decision to use a subscription service?
  2. Describe suggested actions that a person might take to reduce or eliminate subscription services.
Categories: Budget, Chapter 2, Chapter 6 | Tags: , | Leave a comment

Meet the “Henrys” (high earners not rich yet)

Many young people making high salaries still say they feel broke. A “Henry,” short for “high earners not rich yet,” is someone who lives an extravagant lifestyle combined with their student loans has very little money left over.  These “working rich” place a strong emphasis on travel, and often limit their spending on food and clothing in order to afford luxury trips.  While many have a desire to get their finances in order, very few take appropriate actions to do so.

Henrys are characterized by a higher-than-average income, little or no savings, and a feeling of low material wealth. Most of their earnings go toward current living expenses rather than building wealth with investments.

For additional information on high earners not rich yet, click here.

Teaching Suggestions

  • Have students conduct online research to determine various financial attitudes and behaviors of people in different age categories and life situations.
  • Have students prepare a video that recommending actions to the people described in the article.

Discussion Questions 

  1. What factors might be influencing the financial activities of the people described in the article?
  2. Describe possible financial concerns associated with these financial attitudes and behaviors, and recommend corrective actions that might be taken.
Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , | Leave a comment

Kakeibo: The Japanese art of saving money

Kakeibo, pronounced “kah-keh-boh” and translates as “household financial ledger,” is a method used in Japan for managing personal finances. For over 100 years, this system has helped people make smarter money decisions.

Similar to other budgeting systems, kakeibo is designed to help you understand your relationship with money by recording all financial inflows and outflows. As proven by research, this recordkeeping method emphasizes physically writing your financial activities making you more aware of bad money habits. Kakeibo can help you become completely honest about your spending with the use of four categories: (1) needs, (2) wants, (3) culture, such as books and museum visits, and (4) unexpected – medical expenses or car repairs.

Kakeibo encourages you to ask yourself these questions before buying any non-essential items, or things you buy on impulse:

  • Can I live without this item?
  • Based on my financial situation, can I afford it?
  • Will I actually use it? Do I have the space for it?
  • How did I come across it in the first place? (Did I see it in a magazine? Did I come across it after wandering into a gift shop out of boredom?)
  • What is my emotional state in general today? (Calm? Stressed? Celebratory? Feeling bad?)
  • How do I feel about buying it? (Happy? Excited? Indifferent? And how long will this feeling last?)

In addition, to spend more mindfully, Kakeibo recommends that you:

  1. Leave the item for 24 hours.
  2. Don’t let major “sales” tempt you.
  3. Check your bank balance regularly.
  4. Spend in cash.
  5. Put reminders in your wallet – use a sticker: “Do you REALLY need this?!”
  6. Change the environments that cause you to spend.

For additional information on kakeibo, go to:

Link #1

Link #2

Link #3

Teaching Suggestions

  • Have students conduct a survey to determine reactions to this budgeting system among people in different age categories and life situations.
  • Have students prepare a visual summary of some of the characteristics of the budgeting system.

 Discussion Questions 

  1. What elements of this budgeting system might people find beneficial? What are possible drawbacks?
  2. If you were to implement this system for your life, which actions would you select to do first?
Categories: Chapter 1, Chapter 2, Financial Planning | Tags: , | Leave a comment

Blog at WordPress.com.