Why you should care
In the face of a potential global recession, getting financially fit is more important than ever.
Twenty-seven-year-old Hailey Westbrook of Augusta, Georgia, had a house, two new cars, a beautifully landscaped backyard … and $73,000 in debt. While both she and her husband had well-paying jobs in construction operations, Westbrook says they quickly became overwhelmed by what they thought they should be buying.
“We were like, we’re making good money, we need a house. We need cars. We need a bank loan for a backyard project. We began putting more purchases on credit cards, and found ourselves becoming stressed about repayment,” recalls Westbrook.
After a year of watching balances that never seemed to drop, the Westbrooks decided to get a grip on their debt. “We had a joint bank account, but separate credit cards. When we shared our balances with each other, most of our cards had balances in the thousands.”
The Westbrooks were shouldering significant debt, but their situation was hardly unusual.
Nearly one-third of Americans say they have more debt than is manageable, according to the inaugural U.S. Financial Health Pulse.
Through strict budgeting, a windfall in the form of a bonus and sheer force of will, the Westbrooks were able to pay off most of their debt. But Hailey knows she’s lucky to have made the climb toward financial health — which is defined as the ability to manage bills and credit alongside long-term goals like emergency savings, retirement planning and insurance options.
Other Americans, for whom job instability is a reality, aren’t so lucky. Ana Martinez, 50, for example, works as a call center manager in Union City, New Jersey, and says low wages have kept her financially vulnerable. “I rely on nanny jobs to round out my paycheck, but if one falls through it can set up a domino effect on my bills,” she says. When her cell phone bill was posted two days before receiving her biweekly paycheck, a slow month for babysitting left her with no extra money. “I need a phone to find jobs, so disconnection isn’t an option, and then I’m faced with an expensive late fee if I don’t pay the bill. There’s no way to get ahead.”
And the most vulnerable Americans tend to be the hardest hit by exploitative banking practices. “I have friends with low credit who jump on plans to spend $1,000 to improve their credit,” says Georgina Wilson, 37, a tax adviser in Jersey City, New Jersey.
“I tell them, no, you can improve your credit all by yourself. You don’t need to spend more money.” But Wilson says the message doesn’t always translate for people, like herself, who were raised in paycheck-to-paycheck households. “I never knew what a 401k was, it just wasn’t discussed in our house,” she says. “So I learned on my own because it was something I was interested in, and I consider it my duty to share my knowledge with the rest of my community.”
And while Wilson is doing her small part to help her neighbors, the lack of cohesive community financial literacy support can be problematic, notes Jennifer Halloran, head of brand at MassMutual who leads the Live Mutual Project — an initiative that brings together resources and partners to help financially empower communities. “So, we asked ourselves: How do we support people who are on the brink of being able to get into better economic shape in these financial deserts? How can we, as a company, leverage our financial resources and expertise, and maximize our intended positive impact?”
This in-the-trenches strategy developed from an organizational ethos that prizes working collaboratively with the community it aims to serve, explains Dennis Duquette, president of the MassMutual Foundation. “We engage with the community, we listen, we build trust, and we act,” he noted. “Rather than come in and say, ‘Well, we’re MassMutual, and we know what the problem is. You need to do X, Y, and Z,’ we’re really taking more of a community-organizing approach.”
This means focusing on economic stressors — and coming up with impactful ways to create change. For example, one area for financially vulnerable individuals to focus on is reigning in high-interest debt. “It’s one of the first things I tell my clients to do,” says Maria James, founder of Pocket of Money, which promotes financial literacy and helps people who may’ve been financially vulnerable in the past. A practical strategy she recommends is to develop multiple income streams or side hustles. “That way, if there is a disruption such as a layoff or furlough in one income stream, you still have some money coming in in order to mitigate financial disaster or financial emergencies.”
James also urges people to find a budgeting system that works for them — whether that’s a sticky note or spreadsheet — regardless of bank balance. “It doesn’t matter how much money you have if you don’t know what to do with it,” she says. “If you mismanage $100, then you will mismanage $100,000 or a million dollars.”
Good financial management is the surest path to financial stability and security — and the gateway to lasting financial health.