April Is Financial Capability Month

The month of April is synonymous with many things — spring, taxes, April showers,April Fool's Day. What it should perhaps be most associated with is financial empowerment, which is no joke. April is Financial Capability Month. Learn the basics over the next 30 day's and get your financial life in order

 

The month of April is synonymous with many things — spring, taxes, April showers, April Fool’s Day.  What it should perhaps be most associated with is financial empowerment, which is no joke. In 2004, the Senate did precisely that when it officially recognized April as National Financial Capability Month. Over ten years later, those poor fiscal habits are still a challenge for many people, from every economic rung on the ladder. As a financial educator and coach,  I see the consequences of these bad habits every day. A lack of knowledge about financial matters is the root cause of many poor decisions about credit, saving money, investing, banking, and many other issues that seriously threaten the financial stability and well-being of individuals and their families.


Financial Illiteracy Costs $9,724.83

3,006 people in six age categories across the US. People were asked, “Across your entire lifetime, about how much money do you think you have lost because you lacked knowledge about personal finances?”   Respondents estimated that their lack of financial knowledge cost them between $9,724.83. This figure is looking at the low end of the spectrum. If you look at the high end, respondents estimated a whopping $13,237.94 lifetime loss due to financial illiteracy. Reported lifetime losses over $15,000 were reported by 1 out of 3 respondents. 1 in 4 people reported losses over $30,000 due to a lack of financial knowledge.
When I look at these figures, I think of all the experiences I could have or things I could do with that lost money. Don’t fall prey to financial illiteracy, educate yourself on money matters.

 Common  Facts and Fixes

In honor of Financial Literacy Month 2017, I am pleased to highlight some facts about how well (or not so well) Americans are managing their personal finances these days, as well as suggested “fixes” that can help you overcome these common obstacles to better financial health.
Fact: Only 40% of U.S. households report good or excellent progress in meeting their savings needs.
Most U.S. families are struggling to reach their financial goals. This might mean not saving enough for the family vacation and charging the flight on a credit card. For many of my clients, it can often mean not having enough for gas from week to week, or taking out illegal payday loans.

Fix: Whether on your own or with a financial coach, you can identify obstacles and create a plan (and a budget!) to guide you. In many cases, it starts with a look back to where your money is being spent, and then identifying expenses that can be cut, maximizing your income, and taking advantage of income-support benefits. Keeping your goal front and center is crucial.


Fact: 64% of Americans do not have enough cash to handle a $1,000 emergency.

Most people can recall the exact moment when they fell into their debt spiral, and it is very often when a crisis arises. Without savings on hand, you will have to either borrow money from friends and family or use your credit card.

Fix: It’s simple. Start by creating a financial capability fund, and stick to it. One of the major determinants of financial security is the ability to consistently save a portion of your income. Start with whatever amount you can afford – $50 or $5 a month – and increase the contributions as you grow your income and optimize your budget.


Fact: One in four student loan borrowers are either in delinquency or default on their student loans.

Student loan debt passed the $1 trillion mark in 2012 – exceeding both credit card and auto loan debt. If you are not in default, but still struggling to keep up, you have a few options. You might be able to resolve a delinquency with a deferment or forbearance if you qualify, which are ways to temporarily pause monthly payments. You might even qualify for an income-driven repayment plan where your payment will be determined by your discretionary income. For tools and resources, go to http://www.studentloans.gov and https://studentaid.ed.gov/sa/.

Fix: Once your federal student loan is in default, your options are limited. You must either rehabilitate the loan or consolidate it out of default with a new loan. Though servicers are supposed to thoroughly explain your options, you can also speak with an impartial financial counselor or professional. In addition, access the U.S. Department of Education’s special portal developed for students in default at http://www.myeddebt.ed.gov.


Fact: Medical bankruptcy is the number-one cause of personal bankruptcy in the U.S.

Unfortunately, the threat of medical debt doesn’t seem to be subsiding. Americans pay three times more for medical debt than they do for bank and credit-card debt combined. Even with more people covered by some form of insurance, medical debt is still stymieing progress toward achieving financial goals.

Fix: Ensure that any upcoming procedures are covered under your insurance plan  If you have a high-deductible insurance plan, make sure that you have at least the amount of the deductible saved in your financial capability fund. You might want to consider low-deductible insurance plans, but be ready to pay more in monthly premiums.

It never hurts to ask for a discount before securing services. In fact, many local, government-funded hospitals offer a sliding scale for services and procedures. For the uninsured, utilize community health centers and other free or low-cost programs and services.


Fact: An estimated 825,000 adults lack even a basic checking account.

Banking is a crucial pathway to financial inclusion and security. It provides a platform for effectively managing your money. Without access to affordable banking products you are robbed of the benefits of the formal banking system and are often forced into more expensive and less secure alternatives.

Fix: There has been a lot of progress in making bank accounts accessible for low-income Americans. You still need to watch out for fees. Banks are now offering more options and there’s a proliferation of free online bank accounts.


Today is April 1! We still have time to mark the occasion by making ourselves a promise to become more educated about our finances. Personal finances can be tricky and intimidating. With the right resources and support, everyone can move closer to financial stability and achieve goals they set for years to come. Join me over the next 30 day’s for 30 step’s you can take to become financially literate.

Disease Called Debt
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8 comments on April Is Financial Capability Month

  1. Jax
    April 1, 2017 at 7:24 pm (3 months ago)

    These are some sobering statistics and some great tips about how to fix them. I completely agree about saving-start with whatever you can manage, and then try to increase it whenever you can. Anything you can save is better than nothing at all.

    Reply
    • tracie45
      April 1, 2017 at 10:28 pm (3 months ago)

      Jax, that’s exactly how I started saving. I was only able to save $5 a payday when I first started my financial journey. I have heard people say that they want to be able to save large amounts at a time. I tell my clients all the time start with what you can and work your way up to what you want to save. Thanks for reading!

      Reply
  2. Femme
    April 1, 2017 at 7:39 pm (3 months ago)

    For medical debt, look into financial assistance programs, too, which are mandatory for non profit hospitals!

    Reply
    • tracie45
      April 1, 2017 at 10:26 pm (3 months ago)

      Thanks so much Femme! I will go back and include that in my post and of course give you full credit. Thanks for reading!

      Reply
  3. Mel @ brokeGIRLrich
    April 2, 2017 at 9:39 am (3 months ago)

    Man, those facts are crazy. And I can believe it about the medical debt. Our healthcare system really needs a major overhaul.

    Reply
    • tracie45
      April 2, 2017 at 12:16 pm (3 months ago)

      Absolutely Mel! Sobering facts. I agree, the healthcare system does need a major overhaul. Thank you for reading!

      Reply
  4. Jason Butler
    April 2, 2017 at 10:00 am (3 months ago)

    It’s a shame that 64% of Americans can’t handle a $1000 emergency. A couple of years ago, I would have been in that group. I remembering reading that stat somewhere and realizing that I had to change it. Hopefully, more people will start saving.

    Reply
    • tracie45
      April 2, 2017 at 12:12 pm (3 months ago)

      Jason that is so true. People have their priorities out of order. I would rather be covered in case something happens than to have the latest stylish whatever. I hope more people will begin saving as well. Thanks for reading!

      Reply

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