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Do personal finances still work in our changing economy?

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"This has a big impact on the way people handle money," Schneider said. "The economy has been growing and the unemployment rate is relatively low and is declining, however, we do not see that growth and prosperity are distributed to the bottom." While Ms. Schneider agrees that financial education is necessary and can be useful, she is also concerned that putting too much emphasis on it as a solution to financial challenges takes away the responsibility of the main actors in our economy, such as banks They offer high-risk predatory loans or companies that take advantage of workers.

However, something that financial education advocates and critics seem to agree with is that if we are going to help people navigate this existing system, the way we talk about money has to evolve. With that in mind, here are some new ways we can think about personal finances.

Saving is a habit, not a goal.

"If your budget is dramatically different from one month to another, then a lot of standard financial advice does not apply to you," Schneider said. Most financial tips start with a monthly budget, but many people manage their money daily and ask what they can pay today. This makes traditional savings approaches difficult.

Traditional personal finance advice focuses on saving a lump sum, such as an eight-month living expense, or $ 1,000 for an emergency fund. But that can be difficult to plan when you have an income that fluctuates greatly. It is better to think of saving as a habit than as a goal, especially when you have a variable income.

"It is very easy to look at a savings amount as a goal," said Ms. Schneider. "Those benchmarks give you a goal to work for, but it's like trying to take 10,000 steps in your Fitbit. You're supposed to walk every day, it's not like you reach 10,000 steps and then stop walking." For example, instead of thinking of your savings as a $ 5,000 goal, accept it as a habit of saving $ 100 per week.

Ms. Schneider's research also found that once some savers reached their goal, they went out of their way to keep that amount intact, which sounds great, but it can be counterproductive. Even if the savers had an emergency, they would pay with a loan or spend the expense on a high interest credit card just to keep their savings. "It is demoralizing for people when they have to break their savings," Schneider said. "The data supports that people are more likely to continue saving if they think of their savings as continuous behavior rather than a single goal."

Debt relief options are more important than ever

"The growing debt burden is a problem that we should pay close attention to," said Schneider. And they are not only student loans, but also credit card debts, car loans, mortgage debts and, of course, medical debts. In 2018, Americans borrowed $ 88 million to pay for medical assistance.

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