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 Continuing Series on the 6 Financially Healthy Behaviors Money is like food in a lot of ways. It is something that we gather and consume, and it is necessary to live. Just as improper behavior with food leaves you in ill-health, an inappropriate relationship with money can prevent financial well-being. Crash diets and get rich schemes may provide short-lived results, but without a fundamental behavior change, the results will not last. Often when it comes to money, some of our behavior can be subconscious. Our actions can be influenced by our money habitudes or by one of the four external financial health influencers. Here are 6 financially healthy behaviors working-class households can use in the journey to financial well-being. These 6 financially healthy behaviors will increase your financial capabilities and lower your money stress.  SMART GOALS The next financially healthy behavior, we will look at in our series is “Plans and Prioritizes.” When you add purpose and persistence to this financially healthy behavior, you can achieve financial well-being and a MoneySmartLife.
Prioritizing is determining what is REALLY important to you and your household. What has the first claims on your time, talents, and treasure? It is a balance of short and long term goals informed by your values then backed by your time, talents, and treasure. Applying your resources toward your values will result in long term success and financial well-being. It also eliminates regrets for misspent time and money. “No one ever said on their deathbed, ‘I wish I’d spent more time at the office.” --Harold Kushner. This is where the rubber meets the road. What kind of life do you really want? And what resources do you need to live it? There are no right or wrong answers. Nor should there be any judgment. Once you’ve made that decision, then adopt a lifestyle that lets you achieve it. There will be some tough choices to be made amid persistent societal/marketing pressures to conform. Conform to a greedy, consumer-based, capitalist economy. I use those terms as descriptions, not as indictments. Because that same economy can provide the resources to fund your dreams and allow you to leave a legacy. If you have a plan and financial capability. Even the wealthy prioritize. No matter how rich a person is, there is never enough money since dreams always exceed available money. Or else it wouldn’t be a dream. Unfortunately, many working-class households don’t plan. “Planning ahead is a measure of class. The rich and even the middle-class plan for generations, but the poor can plan ahead only a few weeks or days.” --Gloria Steinem. The reality is that you only have so much time and energy per day. If you have to use most of it to provide basic needs or resolving immediate money crises, then long-term planning often suffers. It is harder to see and move toward the horizon when your back is burdened, and you face gale-force economic headwinds. This is especially true of people of color in America that have suffered generations of dispossessions through the instruments of predatory capitalism. Here are two facts about priorities.
Planning behavior requires kinetic action. “Reduce your plan to writing. The moment you complete this, you will have definitely given concrete form to the intangible desire.” Napoleon Hill. Correct planning requires you to set goals and write them down. How much of your time, talent, treasure, and tenacity will be expended? What will you achieve at the end of the expenditures? Visioning and goal setting is one of the 7 components of financial capability. Your plan should be more than a general idea of where you want your life to be. Your plan should have specificity. That is where goal setting comes in. Be sure to set S.M.A.R.T. goals. Visioning is about seeing your life as you want it to be and the path to get there. Proper visioning is both pragmatic and aspirational. A dreamer must be asleep to dream. A visionary must be awake to see. Whether by dream or vision, you must consistently act in concert with it to make it a reality in your life. Let me finish with a few notable quotes about planning.
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1. Plans and prioritizes 2. Manages existing debt and has access to potential resources 3. USES AN EFFECTIVE RANGE OF FINANCIAL TOOLS 4.Builds and maintains reserves 5. Manages and recovers from financial shocks 6. Balances income and expenses
Continuing Series on the 6 Financially Healthy Behaviors Often when it comes to money some of our behavior can subconsciously be influenced by our money habitudes or by one or more of the four external financial health influencers. This can result in frustration and missing your money goals. Money is like food in a lot of ways. It is something that we consume and is necessary to live. Just as improper behavior in relation to food leaves you in ill-health; an improper relationship with money can prevent financial well-being. Crash diets and get rich schemes may provide short-lived results but without a fundamental behavior change the results will not last. Here are 6 financially healthy behaviors working-class households can use in the journey to financial well-being. These 6 financially healthy behaviors will increase your financial capabilities and lower your money stress. In no particular order of importance, the first financially healthy behavior is “uses an effective range of financial tools.”  Ultimately the responsibility of learning how to manage money rest with the individual
Since hominids roamed the Rift valley into the plains of Africa, effective use of tools gives a person the ability to alter an environment for their benefit. That is true for your money environment also. Each household operates within a larger economy. That larger economy creates an environment ranging from wholesome to toxic that generates irresistible forces that impact households. Altering that environment for your benefit through the effective use of some financial tools will help you succeed in your financial evolution.
Credit cards are a necessary part of life in 21st century America. They can be a bane or a blessing depending on ownership. By that I mean, “Do you own your credit cards or do your credit cards own you?” A well-managed credit card can provide increased monthly cash flow and lifestyle enhancements through rewards and other cardholder benefits. Cash advances can also be used as part of a last resort safety net or emergency fund. Credit cards should be proactively managed for rewards, utilization ratios, and annual limit increases. Poorly managed credit cards lead to high-interest rate debt, stress, and a diminished lifestyle. This is like using a tool on yourself instead of on your circumstances. This is what happens to the undisciplined money managers and impulsive spenders. If this is your situation, there is hope. You don’t have to stay that way. Everyone engages with the economy through Financial Services. These services and products are sold by a variety of entities. Accessing these services requires both prudence and due diligence. Buyer beware! There are many “trick and trap” instruments promoted to the ill-informed and desperate. Loans of all types can have such terms: Payday, Title, Student, Mortgage, Auto, etc. Strategically accessing capital when you need it is a good thing. Of course self-funding, though not always possible, would be the best course. There is nothing wrong with borrowing. But do so when it is the only option left. Borrowing should never be your first option. Do you really need to borrow? What are the terms? Can you maintain the payments even if your income is reduced? Checking/Savings accounts are necessary to engage the economy. These deposit accounts give you access to cash and the ability to make payments. Your deposits are held securely until you access them through cash withdrawals, debit cards, wire transfers, or ATMs. Lack of access to these basic services has left many “unbanked” at the mercy of the unscrupulous and greedy. Those that do have access must be ever vigilant of fees and other balance reducing charges that are profit centers for some financial institutions. Continuous financial education must be a value that you fully embrace. Thanks to Google, YouTube, MoneySmartLife.org, and a plethora of financial websites and books you can always be informed about your money. Being informed will help you make better decisions and plan for success. You don’t have to be an Accountant per se, but you should be fluent enough to discuss your situation with one. Be aware when consuming financial information of its source and affiliations that may result in bias or steering. Look for objective sources of information like MoneySmartLife.org. This is not to say there isn’t great information on commercial sites. There most certainly is. Just be aware of whose paying the piper for the tune being played. Investments are assets you have above your living expenses and emergency fund. They generally have a long term purpose or goal such as capital appreciation or income. Whether you engage a Financial Advisor or decide to go it alone, the basics must always be satisfied. Those are your time horizon, risk tolerance, and the suitability of the investment. All three should be satisfied before you invest or engage an advisor. The main thing investments should do is put you on the positive side of the interest equation. Which side of the interest equation is more characteristic of your money; paying it or receiving it? Insurances are part of your risk management strategy and disaster recovery plan. Having appropriate coverages can help you offset a loss due to a covered event. Life, health, home, auto, business, renters insurance markets are highly competitive. This means you should regularly review your coverages and seek competitive quotes. Make sure whichever company you choose has a reputation for fairly paying claims. Money paid in taxes doesn’t contribute to your wealth. Therefore utilizing available Tax Shelters lets you keep more of your money. Shelters don’t have to be elaborate but simply available such as charitable contributions, self-employment expenses, 401(k), HSA, or mortgage deduction. Paying taxes contributes to the quality of life. It is the irrefutable responsibility of every person to pay some taxes. But you should not pay more than you owe. As an American, my attitude toward all forms of taxation is the same. Tax evasion is a crime. Aggressive tax avoidance is our patriotic duty. Since tax law frequently changes this should be a part of your continuing education. A Credit Score can be a tool. Maximize your credit score. Excellent credit (750++) will allow you to take advantage of sales incentives like sign and drive or 0% interest car loans. You will also get lower interest rates when you do borrow. Move your credit score up above 775 strategically and on purpose. Your ability to borrow should be viewed as part of your safety net. Your credit card cash advances and spending limits are criticalcomponents that can be managed to help mitigate some of the impacts of an emergency while buying you time. An excellent credit score can give you immediate access to additional money during an emergency. It is a MoneySmartLife strategy to responsibly and proactively expand your borrowing capacity annually. Just as your net worth expands annually so should your credit capacity. These 8 money tools are available to most working-class people. Know how to use them capably. The cliche applies, "it is a poor worker who blames the tool." The World Bank defines “Financial capability as the internal capacity to act in one's best financial interest, given socioeconomic environmental conditions. It, therefore, encompasses the knowledge, attitudes, skills, and behaviors of consumers with regard to managing their resources and understanding, selecting, and making use of financial services that fit their needs.” Ultimately the responsibility of learning how to manage money rests with the individual. If you think somebody cares more about your money than you do; you have another think coming. Effectively using all available money tools is on you.
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Current events dictate that it would be wise for every family to have a disaster recovery plan. Stuff happens all the time. Some of it not of your own creation. Whatever its source, it impacts you and forces you to regroup. What are you going to do when disaster strikes? How are you going to recover from it? One of the important aspects of financial capability is Protecting. You have worked hard to make gains to achieve financial well-being.
Resilience is an important part of financial well-being. As any world-champion prizefighter legendarily says, “it not just how hard a punch you threw; but also how hard a punch you took?” that matters. Being prepared and not just depending on luck or largesse to bail you out of a tight spot is a Money Smart Lifestyle. In the fight that is working-class financial life in 21st century America, a properly resourced emergency fund will help you absorb and recover from life's inevitable shocks. Your emergency fund can contain more than just cash. Prepping is a movement. The focus of this post is narrow. It is an overview discussion of food stores as a portion of an emergency fund, not a preppers guide. Prepper or not, it is prudent for every family to have a food security plan that anticipates disruptions. Also when properly integrated, a food store can become a cash flow resource. Let’s look at some basics. Types of disruptions where everybody is affected by the same catastrophe. You should be able to sustain your family for a minimum of 3-7 days in the event of a catastrophic event.
There is a chronic lack of cash when your income is routinely reduced through employment practices such as temporary layoffs, reduced hours, uneven or seasonal schedules, and lost hours due to unpaid sick or disability leave. Using a food store as part of your meal plan can reduce stress and the need for cash during such times. Types of disruptions where society collapses for 90+ days by a zombie apocalypse or whatever is beyond the scope of this blogpost. Besides, you won't be using Money anyway, but your food stores may have some barter value. Good luck. Here are some things to do to start prepping for disruptions. You don’t try to swallow the elephant in one bite, so to speak.
Make sure the plan works by rotating your stores regularly. Rehearse emergency situations before the emergency arises. These dry runs can be made into fun family activities. They will let you see where your plan needs tweaks. Can you really make 7 days of interesting meals using only your food store? Don’t wait until you have to do it to find out if you can. |
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