Finances FYI Presented by JPMorgan Chase
Too many people were not taught about money in school or by their parents and have developed poor habits of overspending, ignoring their finances, or not planning for the future. Financial success is available if you are willing to set goals and make a plan to achieve them. This roadmap will guide you through the process.
Set Goals
When it comes to setting financial goals, the more emotionally connected you are to them, the more successful you are likely to be. Paying off your credit card debt may feel like the right thing to do, but it can be difficult to stick to your plan unless you are motivated by what that achievement means for you and your financial well-being. Start by envisioning what a financially stable and prosperous life looks like for you. Some questions to consider are:
- How would my life be better without money stress?
- What would my home look like if I had enough money?
- How would I spend my free time?
- How could I make my life easier?
- How would I be more generous?
Once you have a clear vision of your future, set goals to help you achieve it. Along with being tied to your vision, your goals should be SMART: specific, measurable, achievable, relevant, and time-bound. Brittney Castro, a certified financial planner at Mint, shared some tips with CNBC about setting achievable goals, including making small, progressive shifts instead of setting goals that are too extreme.
For example, say that you use this debt calculator to set a goal to pay off your credit card debt. A SMART goal would be to pay off my $10,000 credit card debt by cutting back on my shopping and paying $524 toward the debt for 24 months to achieve my long-term goal of saving for a larger apartment.
Understand Money Psychology
The study of how emotions and beliefs affect our financial habits, like saving and spending, is known as money psychology. Our childhood often shapes these behaviors. For instance, our perceptions of the availability of money and the effort required to earn it are influenced by growing up with affluence, as middle class, or in poverty. We also internalize our parents’ financial beliefs and behaviors, consciously and unconsciously. We may develop ingrained notions of money like “there will never be enough” and “money is best saved, not spent.” The good news is that we can choose which attitudes and actions support us in reaching our objectives and try to develop new ones if they stand in the way.
Additionally, money psychology helps us understand how our emotions, such as stress, sadness, or even happiness, can lead to impulsive buying or poor decisions. For example, fears about losing money may keep us from investing, or unrealistic expectations about our financial knowledge could lead us to invest in risky avenues. Some people will use past experiences as excuses for staying stuck in poor decision-making or avoidance, such as saying things like, “I’m not good with money.” Fortunately, when we understand how money psychology plays a role in our behaviors, we can address these issues and practice being more mindful of our financial decisions.
Educate Yourself
Since most of us don’t learn about personal finance in school, we must engage in our own education. So, how do you find helpful resources?
Yahoo Finance reports that only 4% of people have read a financial book. Yet, books are a great way to learn about budgeting, investing, money psychology, and other helpful financial concepts and strategies. You may prefer to listen to money podcasts to hear real-life examples, such as Everyone’s Talkin’ Money, The His and Her Money Show, or I Will Teach You to Be Rich.
Online research can be a valuable tool for learning more about specific topics. Make sure you are using reliable sources such as the Office of the Comptroller of the Currency’s Financial Literacy Resource Directory, Investor.gov, or Better Investing. You can also search for workshops hosted by local colleges, libraries, or banks in your area.
Improve Your Money Skills and Create Good Habits
Like any other skill, getting good with money takes practice and self-evaluation. These skills include refraining from overspending, saving, and investing wisely. You may slip up on occasion or make mistakes. But the faster you return to working on your goals, the less financial damage you will cause. Eventually, these practiced skills can become natural habits.
Savings and habit trackers can be supportive tools for monitoring your day-to-day decisions and long-term goals. When making sound financial decisions feels challenging, remember to continue educating yourself and keep your long-term vision in mind as a motivator. Build on each success with new goals that will bring you closer to financial security and freedom.
Finances FYI is presented by JPMorgan Chase. JPMorgan Chase is making a $30 billion commitment over the next five years to address some of the largest drivers of the racial wealth divide.
