The financial behaviors that may support financial well-being
If you are concerned about your financial state of being, learn how to manage your money.
A recent report authored by the Consumer Financial Protection Bureau (CFPB) defines financial well-being as “a state of being wherein a person can fully meet current and ongoing financial obligations, can feel secure in their financial future, and is able to make choices that allow enjoyment of life.” Given the opportunity, what behaviors would a person maintain to achieve this “state of being?” Four specific behaviors are described that one needs to exhibit in order to achieve financial well-being as defined above.
First, a person needs to manage their money. Simply put, you need to manage what comes in and what goes out. A person seeking to achieve financial well-being needs to “live within their means.” This may mean being frugal, having discipline and being able to distinguish between wants and needs. In addition, this person should be intentional in their lifestyle and think about how today’s decisions effect tomorrow’s outcomes. This person is content with living within their means and uses credit wisely or not at all because they have planned ahead and have saved for large purchases. In fact, this person avoids debt or manages it carefully when necessary. However, it is not just what goes out. A person who manages money well will make sure that they have enough income to meet all their needs. This may mean doing whatever it takes to earn an income and avoiding losing income at all cost.
The second behavior that one needs to exhibit in order to achieve financial well-being is to do their research and seek knowledge about their financial decisions. They may talk to a family member or spouse when making a big financial decision. The may seek the wisdom of a friend or co-worker. They may also seek to learn from the mistakes of others around them. If it is a technical decision, they may consult experts or attend a workshop or class to learn more. People who educate themselves or are educated in a vast array of areas may know how to do research in the area that they need answers.
The third behavior that supports financial well-being is planning and goal setting. At the most basic level people who exhibit this type of behavior may make a spending plan to determine the short-term use of their money. People who plan their spending often have short-term and long-term financial goals that they are trying to achieve. These goals can be part of a formal financial plan or their financial plan may be to secure the education necessary to find a career that generates the type of income necessary to achieve their goals. The bottom line is that they have a plan and goals.
The fourth behavior that supports financial well-being is simply “follow-through.” All the managing, knowledge and planning will not result in financial well-being unless the person follows-through with these behaviors. The CFPB’s report points out that people who follow-through are “future oriented” as opposed to impulsive or short-term thinkers. This type of person saves and invests for the future in order to fund their plans. They are intentional and many times seek an education in order to support their plans and dreams.
People who desire financial well-being exhibit the behaviors that support achieving this goal. If you are concerned about your financial state of being, learn how to manage your money. Seek knowledge from those close to you and when necessary from professionals. Make a plan, set some goals and put those plans in to action.
Michigan State University Extension offers a variety of money management programs in-person and online throughout the state of Michigan. For more information on making a spending plan, saving money and making money decisions, check out our money management website.