Personal Finances: Facts and Fixes
Most U.S. families are struggling to reach their financial goals. This might mean not saving enough for the family vacation and charging the flight on a credit card. For NYLAG’s clients, it can often mean not having enough for the cheaper monthly metro card and paying for a more expensive weekly unlimited or a pay-per-ride card, or taking out illegal payday loans.
Fix: Whether on your own or with a financial counselor, you can identify obstacles and create a plan (and a budget!) to guide you. In many cases it starts with a look back to where your money is being spent, and then identifying expenses that can be cut, maximizing your income, and taking advantage of income-support benefits. Keeping your goal front and center is crucial.
Most people can recall the exact moment when they fell into their debt spiral, and it is very often when an emergency hits. Without savings on hand, you will have to either borrow money from friends and family or use your credit card.
Fix: It’s simple. Start by creating an emergency fund, and stick to it. One of the major determinants of financial security is the ability to consistently save a portion of your income. Start with whatever amount you can afford – $50 or $5 a month – and increase the contributions as you grow your income and optimize your budget.
Student loan debt passed the $1 trillion mark in 2012 – exceeding both credit card and auto loan debt. If you are not in default, but still struggling to keep up, you have a few options. You might be able to resolve a delinquency with a deferment or forbearance if you qualify, which are ways to temporarily pause monthly payments. You might even qualify for an income-driven repayment plan where your payment will be determined by your discretionary income. For tools and resources, go to www.studentloans.gov and https://studentaid.ed.gov/sa/.
Fix: Once your federal student loan is in default, your options are limited. You must either rehabilitate the loan or consolidate it out of default with a new loan. Though servicers are supposed to thoroughly explain your options, you can also speak with an impartial financial counselor or professional. In addition, access the U.S. Department of Education’s special portal developed for students in default atwww.myeddebt.ed.gov.
Unfortunately, the threat of medical debt doesn’t seem to be subsiding. Americans pay three times more for medical debt than they do for bank and credit-card debt combined. Even with more people covered by some form of insurance, medical debt is still stymieing progress toward achieving financial goals.
Fix: Ensure that any upcoming procedures are covered under your insurance plan (See this blog by NYLAG colleague Debra Wolf for helpful tips on dealing with insurance providers.) If you have a high-deductible insurance plan, make sure that you have at least the amount of the deductible saved in your emergency fund. You might want to consider low-deductible insurance plans, but be ready to pay more in monthly premiums.
We advise many of our clients to ask for a discount before securing services. In fact, many local, government-funded hospitals offer a sliding scale for services and procedures. For the uninsured, utilize community health centers and other free or low-cost programs and services.
Banking is a crucial pathway to financial inclusion and security. It provides a platform for effectively managing your money. Without access to affordable banking products you are robbed of the benefits of the formal banking system and are often forced into more expensive and less secure alternatives.
Fix: There has been a lot of progress in making bank accounts accessible for low-income Americans. You still need to watch out for the fees, but banks are now offering more options and there’s a proliferation of free online bank accounts. New Yorkers can take advantage of the Take It To The Bank search tool, created by New York City Comptroller Scott Stringer and endorsed by NYLAG. With it, consumers can enter certain parameters and receive a list of banks that offer accounts that match those features, such as no minimum balance requirements, unlimited free transactions, and acceptance of IDNYC, the municipal ID card.
April isn’t over quite yet, so we still have a little time to mark the occasion by making ourselves a promise to become more educated about our financial lives. Personal finances can be tricky and intimidating, but with the right resources and support, everyone can move closer to financial stability and achieve the goals they set for many seasons to come.