Finance

As of the second quarter of 2024, the total household debt in the United States is $17.796 trillion, which is an all-time high. This is an average of $104,215 per household.

 

Financial counselors help clients address money-related issues, such as goal setting and following through with viable plans of action. They combine counseling skills with financial knowledge to help overcome obstacles to financial well-being.

 

Personal finances are often derailed by insolvency events, such as job loss or medical emergency, but destructive money behaviors can also create insolvency.

 

Let us begin by completing the Financial Well-Being Check list:

 

- I prioritize paying for the things I think are most important.

- I consistently save at least 5% of my income.

- I have adequate health, life, home, and auto insurance.

- I check my billing statements every month.

- I am generous with my money.

- I consult with my spouse/partner/family before making major credit card charges.

- I am satisfied with my income.

- On most days, I enjoy my job.

- I make a plan before I go shopping.

- I understand the terms and conditions of my lending agreements.

- I have a good sense of my relationship with money.

- I establish short and long-term financial goals.

- I monitor and adjust my financial goals to measure my level of success and meet changing goals.

- I am informed about current issues, trends, and legislation that have or may have an impact on my finances.

- I have a spending plan.

- I have a retirement plan.

- I know where my assets will go when I die.

 

Some elements of financial well-being are more straightforward to assess than others, such as balancing a checkbook every month or having a retirement plan. Financial counseling helps individuals with both subjective and objective measures of success.

 

Objective Measures of Financial Well-Being

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Some objective measures of financial well-being include:

 

• A steady and adequate source of income,

• A positive debt-to-income ratio,

• Adequate cash flow to meet everyday expenses,

• A good credit rating,

• Adequate savings in case of emergency,

• Adequate savings for retirement,

• Adequate insurance to protect individual health, property, life, and family,

• An established and utilized spending plan,

• Identified short and long-term financial goals.

 

Without these essential elements to financial well-being, stress and frustration take over. For example, if debts exceed income, an individual cannot pay all their bills on time. If a person does not have an emergency fund, any income loss can deal a heavy blow. Without a spending plan, special purchases will remain out of reach.

 

The Subjective Side of Financial Well-Being

 

There is another side to money management. How we feel about our money and how we experience the resources that flow in and out of our lives is even more important than how much money we have. According to an annual happiness survey, it takes 1.5 million dollars to make a person happy. Either they win the lottery or they come into a sizable inheritance.

 

In 2021, the average American household income is $68,000, and the total credit card debt is $1 trillion. People are still attempting to buy happiness with credit cards.

 

Jean Chatzky (2007), a columnist for “Money Smart,” conducted her happiness survey and reached this conclusion: Money plays a part in happiness in so much as it allows us to live comfortably from day today. She puts the dollar amount at $50,000, which is about $8,000 above the national average (2007). Yet, suppose we say the $50,000 figure represents the ability to pay monthly bills, save money, and realize short and long term goals. What can we say about levels of income higher than $50,000? The answer comes from Chatzky's research. Beyond that $50,000, the amount that "takes care of things" -- "more money doesn't buy more happiness.(2007)"

 

So, the individual who makes $72,000 a year is not happier than the individual who makes $48,000 a year. Nor is the person who fetches $150,000 a year. From the "comfort level" on up, happiness has little or nothing to do with the question "How much?"

 

However, it does have a lot to do with what we do with our money, how we manage it, and our spending/saving habits. Five of the Financial Well-Being Checklist items came from Chatzky's book, “You Don't Have to be Rich. (2003)”

 

They are listed below:

• Balance your checkbook,

• Save 5% of your income,

• Make a will,

• Give to charity,

• Talk to your spouse or partner about what you plan to charge.

 

According to Chatzky, these are just some of the essential habits that can increase happiness with the income you already have. When she presented her research to Andrew Oswald, the English economist and fellow researcher, he had this to say: "The ability to shape your own life, to control it, is vital. It's highly associated with psychological well being(2003)."

 

Ellis advises against equating self-worth with outside indicators and measures, and instead advises against thinking about what constitutes happiness. Counselors help clients manage the money they have more productively, and examine how they interact with money.

 

Clients present to counselors with a range of needs, including excessive debt, sudden lack of income, and a need for resources they can use immediately.

Somewhere in the middle are most clients. Some of the specific needs of clients are to:

• Avoid bankruptcy,

• Improve credit,

• Resolve delinquent debt,

• Create a spending plan that works,

• Explore spending patterns,

• Resolve marital conflicts over money,

• Plan for retirement,

• Payback student loans,

• Increase income,

• Cut expenses,

• Deal with creditors,

• Exercise consumer rights.

 

There will be as many different client's needs as there are clients, but the goal of financial counseling is client solvency and peace of mind.