When people are asked about their finances, the quality of answers ranges from “financial advisors and literacy experts” to “how do I use a credit card again?” The TIAA Institute shared some findings that show that America may lack the basic financial skills to manage its debt effectively.
Their 2023 ‘P-Fin’ (i.e., personal finance) Index found that America had the lowest rudimentary economic knowledge since 2017. Today, only 48% of U.S. adults would fail a personal financial literacy quiz.
With that surprising statistic, it may be simple to understand that financial advisors, planners and therapists have heard a few common misunderstandings about their bank accounts. In fact, some of those ideas take on a life of its own and become widespread myths. Our own client financial therapist, Dr. Erika Rasure, recalls one of her most often told financial advisor myths in a GoBankingRates.com and Yahoo! Finance article.
She chose to discuss a point about “static budget.” In other words, every month is different. Or, if you’re like 78% of Americans now, every paycheck is different. Everyone has regular bills, but something is bound to happen. A new expense or an unexpected bill impedes stretching your budget a little when you’re least prepared for it.
Rasure told the panel that a budget is “a tool, not a fix-all.” Furthermore, a budget is only helpful with consistency, practice, and fit to your particular needs.
“It’s easy to be scared of — or feel restricted by — a budget. Yet, having one gives you freedom. With a budget, you know exactly where every dollar is going,” she said. “It creates a plan and empowers you to make saying ‘yes’ or ‘no’ easy. If a particular expense is not in the budget, it’s off the table.”
For the other expert insight in the article, we encourage you to bookmark it and read it at leisure. In the meantime, there is nothing to be ashamed of about debt. If you need help, ask. Debt is something you have; it’s not what you are.