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You’d better start taking care of your financial health or else this country is really going to the dogs. You may not feel like it but you are not an insignificant member of your society. If you think that your impact is only felt during elections, think again. Apparently, your financial situationplays an important role in the economy of both your local state and on a national scale. Although the government is reporting that we have come a long way in terms of recovering from the Great Recession, some consumers have yet to feel that improvement. A lot of people are still struggling with their personal finances. While jobs are being created and employment is proving to be steady, Americans are still burdened with debt. The truth is, experts like the increase in the average debt because, in our economy, credit confidence is a sign that people feel good about their financial future. After all, you will not borrow money unless you know that you can pay it back right? But there is another reason to borrow money - when you are faced with an unexpected expense. If you do not have the savings to finance that emergency situation, then you are forced to use credit to overcome that particular situation. According to TheAtlantic.com, the Federal Reserve Board revealed a surprising data about how consumers will pay for an unexpected expense that will cost them $400. 47% said they will either borrow money or sell something. While $400 seems like a small amount, a lot of Americans do not have this in their emergency fund. Obviously, if they had it, they would not borrow money. This says a lot about their financial health. If people do not have a good financial position, that could affect the overall state of the economy.
Study reveals your financial security mattersAccording to a study done by Urban.org, thriving residents have a positive effect on the community and city that they belong to. The study revealed a strong relationship between the financial health of American families and 4 city outcomes:
- Rate of eviction. This refers to the rate by which residents are driven out of their homes - to move to a shelter or live in the streets.
- Fund for homes. This refers to the ability of the residents to pay their rent or mortgage - whatever is applicable to avoid eviction.
- Payment for utility bills. This refers to the ability of the residents to pay for the consumption of electricity, water, gas, and other utility services.
- Use of public benefits. This refers to the residents who have to rely on the local government for help. This usually involves financial aid to pay for basic necessities.
What does this mean?Apparently, when the people are in good financial health, they do not need monetary aid or support from the local government. The rate of eviction will be low and so will the use of public benefits. They are able to fund their own basic necessities like paying for their home (whether that is rent or mortgage) and their utility bills. When your finances are healthy, you get to contribute to the local economy through your taxes. Not only that, you are in a better position to fund local businesses - who in turn will pay more taxes to the city government. This will increase the budget of the community. Since a few people are using the public benefits, the budget can be allocated to projects that will improve the economic condition of the local community. This will attract more people to move in and increase business profits and local taxes even further.
All this is because of the financial health of the residents...
The study also asked two questions. Can a healthy financial position:
- Lower financial hardship?
- Reduce the dependence on public benefits?
- Families with non-retirement savings, even if it is a small amount, have a lower chance of being evicted or relying on public benefits. They are also more able to pay their housing costs or utility payments on time. The data revealed that this is true even if the family only has a low savings level of $250 to $749. The higher the savings cushion, the less likely they are to miss payments, be evicted or rely on public benefits for aid.
- Low-income families who have a savings cushion of $2,000-$4,999 are more resilient financially as compared to middle-income families who do not have any savings at all.