5 steps you can take to be actionable in your financial education
(BPT) - Make no mistake: The past several months have been challenging — both financially and emotionally — when it comes to the disruption the COVID-19 global pandemic brought to our everyday lives.
In its latest Financial Wellness Census Special Report, Prudential found that since May 2020, the proportion of Americans who say they’re financially struggling has more than doubled, to 46% from 22%. Furthermore, 44% cite decreased confidence in meeting their financial goals, and 31% say their ability to achieve those goals is out of their control.
In addition, 18% of people surveyed are taking on debt, and many are borrowing or withdrawing from their 401(k) (11%), IRA (6%) and life insurance (6%) as a result of the pandemic.
Challenging is an understatement. However, this year brings hope, resilience and a light at the end of the long tunnel.
“A once-in-a-lifetime pandemic tragically affected all of us this past year,” said Brad Hearn, president, Retail Advice and Solutions at Prudential. “2021 will be a year of resilience and we’re emboldened by our commitment to help folks feel secure in their personal roadmap to financial security.”
Now is the time to invest in your financial education and grow your financial literacy skills; and it’s not as daunting as it may seem.
In honor of Financial Literacy Month, here are five steps you can take to be actionable in your financial education.
Step 1: Take a step back and reassess
As we look to start fresh in a post-pandemic world, take a proverbial step back to reevaluate your “big picture” financial situation. Ask yourself questions such as, “Are my needs the same as they were back in 2020?” and “What are my goals for 2021?” This type of questioning will help you uncover main topics for your financial education.
It may be to map your retirement plans, to save for that big purchase or to invest in the markets. Whatever the case, not assessing your current picture can inhibit your potential of using financial education to your advantage.
Step 2: Create a savings net
The Census Report found that one-third of people have taken money from their savings to cover current costs, with 20% having reduced or exhausted their emergency savings (less than 50% had emergency savings to begin with), yet only 6% have developed a formal financial plan.
For the base of your financial education, you’ll need something sturdy to work off of such as a savings net. Without one, you’re putting yourself and loved ones at risk for any future unexpected costs to address, hampering your financial confidence and security.
Generally, three to six months of emergency savings is a good target for most people. While that figure may sound lofty, start with small automated contributions to your savings account each month.
Step 3: Create a budget (and stick to it)
What goes together with your emergency savings is your budget, the heart of your financial education progression. Making and using a budget doesn’t have to be hard.
Redefine what a budget means for you by simply looking at your income source(s), and your current spending vs. what you need to spend to achieve your financial goals — such as buying a house, taking a vacation, retiring early, etc. Take a look online at examples of how others creatively budget; allow yourself to feel inspired instead of dispirited.
Empowering yourself through this exercise — and sticking to your defined budget — will help alleviate stress and increase confidence toward your financial future.
“Being disciplined with your income and spending sets the tone for achieving financial security,” Hearn said. “There are a wealth of resources available when it comes to budgeting — from your employer or online budgeting tools, for example — that are often massively underutilized.”
Step 4: Tap into your community
Speaking of underutilized, programs in your local community can serve as a critical (and often untapped) financial lifeline to individuals anxious about money and the future.
Research what’s taking place in your town or city when it comes to financial education training or courses. Local Chamber of Commerce or community college websites are typically a good place to start, where courses typically go for a nominal fee (or free) and can offer a wealth of education.
Also, local community partners and nonprofits are quality outside resources to consider when it comes to starting or continuing your financial education.
Step 5: Seek guidance from a financial professional
Outside of your personal financial education, seek the advice and resources of a financial professional this year, who can help reaffirm your learnings and be a critical tool in following the North Star that is your financial security. You can get connected with many financial professionals when you answer a few simple questions about your goals at a number of websites, such as prudential.com.
“When it comes to finding advice and guidance, there’s a wide spectrum available that spans from digital-only to direct human interaction,” Hearn said. “Throughout the pandemic, we’ve seen an uptick in more people wanting to connect with human beings outside of our digital capabilities when it comes to their current financial situation.”
Depending on your preference, professional advice is always accessible, no matter where you are in your unique financial education journey.
The Prudential Insurance Company of America and its affiliates Newark, NJ.