In a study conducted by the Consumer Financial Protection Bureau, the combination of a lack of a savings buffer, low credit availability, and debt can make consumers especially vulnerable. Although a savings buffer can help consumers weather financial emergencies from individual shocks like a sudden car repair or larger-scale shocks like a pandemic or natural disaster, this analysis also highlights that even consumers with some savings may struggle to meet financial obligations and goals. Savings is just one strategy. While consumers with even small amounts of savings are better able to weather financial shocks, our findings suggest it should be coupled with strategies that address other elements of a consumer’s financial condition.  Their credit health (e.g., credit scores), debt level, as well as their income. Appreciating the complexity of consumers’ financial lives, including how they juggle their day to day finances and plan for the future, all while attempting to withstand unexpected financial shocks, can help policymakers, financial coaches, and other practitioners guide consumers toward improved personal finances and overall financial well-being.

 Consumer Financial Protection Bureau Report: “Emergency Savings & Financial Security” (Part 1 of 7). (2022, March 23). Targeted News Service (USA).

MANAGE YOUR DEBT

What is debt?

When you owe money to someone, you are in debt. Owing money is not always bad.

You might have a loan. You might use a credit card. If you do, you might be in debt. 

But if you pay your bills when they are due, it might help your credit history.

When is debt bad?

Debt is bad when you owe money you cannot pay back. Debt collectors might call you. You might have legal problems if you cannot pay back the money.

Does debt hurt my credit history?

Sometimes, debt can hurt your credit history. For example:

• owing a lot of money on credit cards
• paying bills late
• not paying the minimum amount due
• skipping payments

These things can hurt your credit history.