The financial behaviors that may support financial well-being: Part One
Given the opportunity, what behaviors would a person maintain to achieve “financial well-being?”
A recent report authored by the Consumer Financial Protection Bureau (CFPB) attempts to define “financial well-being.” On page 18 of the full report the CFPB states that “financial well-being can be defined 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?” The report appears to highlight four specific behaviors 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 of 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 in regard to 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.
So people who manage their money and seek knowledge outside themselves before making financial decisions are on the road to achieving financial well-being. We will explore the next two financial behaviors that may support financial well-being in part two.
Michigan State University Extension offers a variety of money management programs 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.
Other articles in this series: