In July 2014, the Federal Reserve released the results of a survey that discussed 6 financial areas in an American household. In the previous article, we discussed the two areas where American consumer habits seem to be improving – housing and saving. Our financial behavior should be monitored closely because there are certain habits that will make you a financial failure – just like there are those that will make you a financial success.
In this article, we will be discussing the remaining 4 financial areas that, unfortunately, did not improve in 2013.
What needs to be improved in our financial behavior?
According to the survey results published on FederalReserve.gov, the remaining 4 financial areas include credit availability, college finances, retirement and medical expenses. Here are the data derived from the survey and home Americans implemented the necessary consumer habits on each.
Based on the data from the Federal Reserve survey, the general availability of credit is low in 2013. 31% applied for new credit in the past year. 1 out of 3 of those who applied was turned down or was only approved to borrow a lesser amount of money. Almost 2 out of 10 Americans postponed getting new credit because they knew that they will not be approved. But despite this, more than half of the respondents said that they believe they will be approved of a mortgage loan.
These data give us a hint of the credit report of Americans today. If 1 out of 10 Americans were turned down or had their credit amount lowered, that means they did not have the best credit score in 2013. This needs to be improved by implementing better consumer habits especially when it comes to credit management.
Student loans continue to be a growing problem for a lot of us. It is actually a sad fate for a lot of youngsters who are honestly unaware of the repercussions of this type of debt. How can the next generation do any better when they are getting out of college with so much debt? While this debt is crippling a lot of young adults, many still believe in getting a college education.
According to the data found in the Federal Reserve survey, the borrowing of student loans depends on the education that that student wishes to have. 24% of the survey respondents said that they have college debts of some kind (whether it is for them or for someone else). 16% said they applied for student loans to finance their own education. Those who are in debt have an average of $27,840 – with the median being $15,000. 18% of those who got the loan for their own education admitted that they were behind on their payments. Some of them even have debts in collection already.
The survey also revealed that 54% of the student loan borrowers who failed to complete their program had to cut back on their spending. 56% of those who did not finish their program also said that the financial gain from the education is not enough to outweigh the money they borrowed to finance the said program.
At this point, this financial area is still something that we need to work out. We cannot afford not to act on this because this particular problem can really cripple our nation’s financial future. The direct consumer habits that we need to implement are not yet defined but among the things that we can work on right now includes budgeting and a stronger campaign to educate high school students and younger about personal finance.
The general findings from the survey about retirement are not too promising. Overall, a lot of Americans have reported that retirement is one of the financial areas that they are not prepared for. Half of the respondents said that they have not yet planned for retirement. Half of that group actually give little thought to planning anything at all and the other half admitted that they have not done any planning at all.
31% said they do not have any savings for retirement. 2 out of 10 respondents are those who are nearing retirement. 25% said they have no clue how they will pay for their expenses when they retire. 24% of those aged 55 to 64 said they plan on working until they drop just so they have the resources to pay for retirement expenses.
Thanks to the Great Recession, a lot of people had to push back their retirement date. 15% of the people who retired after the economic crisis said that they did so earlier than planned because of it. The main reason is possibly the rampant job loss that happened during that time.
It is obvious that this is also one of the important improvements that Americans need to work on. Consumer habits that will help boost retirement funds include getting rid of debt, saving more from the income and making smarter investment choices.
The last of the financial areas that need serious improvements is all about medical expenses. The cost of getting medical care is steadily rising. More and more people are being saddled with huge medical debts. In fact, it may even be true that some medical bills are making people sick from the stress.
The survey mentioned that 34% did not seek medical help in the past year because they could not afford it. 43% said they cannot afford a major medical treatment because of the out of pocket expenses. This means a lot of consumers who are burdened with medical debt are those who have health insurance. Despite the coverage, they are still having troubles with their medical expenses. If this is the case, then how much more difficulty are those without insurance facing at the moment?
We cannot really encourage everyone to get a health insurance if their monthly income cannot afford it. But the consumer habit that you need to implement here is clear – saving up for an emergency fund.
How to improve your financial habits
Improving consumer habits is easier said than done. After all, a habit is something that you do unintentionally. It is also something that you usually like to do. That makes this action a hard one to get rid of.
Here are some tips that you may want to use in order to improve your consumer habits.
- Know why you have to change the habit. This will serve as your motivation to be successful in changing your habits. You can choose to be negative about it by focusing on the dangers of not changing your ways. According to TheGuardian.com, the debt of Americans are rising “ominously.” The article is predicting that if things do not change soon, it could lead to another economic crisis.
- Set a goal. This is a positive way that you can motivate yourself to change your consumer habits. Find a dream that you want to achieve in the future and focus your energy on that. It should help you work on the habits that you need to develop.
- Identify the habits that you need to develop or remove. It is easy to do this. If a particular habit will keep you from your goals, then that is a bad habit. If the habit can bring you closer to the goal, then that is the good habit. In most cases, the good consumer habits include budgeting, saving, smart spending and investing.
- Implement the right habits. Lastly, you want to be able to implement the correct habits to replace the bad ones. It is said that if you do something consistently for the next 21 days, that can be developed into a habit. That may be something that you can do to make sure that the habit will stick.