Why and how people spend money are deeply rooted in psychology – the psychology of spending. Our choices are influenced by how we grew up, social comparisons, our emotions and other factors.

In this article, we will discuss the psychology of spending, how spending has changed over the last few years, the impact of social media and how credit counseling can help.

What influences people’s spending habits?

Psychological, social and environmental factors heavily influence spending habits.¹ The first place we learn about spending and money management is at home with our family of origin.

Learned spending habits

”Spending behaviors can be viewed as a learned behavior often transmitted by parents and other influential individuals, and … passed from generation to generation,” according to a study on the psychological side of spending behaviors.²

Children’s early exposure to spending money on needs and wants has an unconscious but significant impact on their future spending habits. A parent who splurges when a windfall comes, then struggles to afford daily necessities, provides a drastically different model for children than a parent who pays bills on time and uses extra funds to pay down debt or grow their savings account.

“Spending behaviors are deeply tied to emotions, upbringing and societal pressures,” says Melinda Opperman, Chief External Affairs Officer for , an ��ѻ��ýmember. “Shame, guilt or anxiety around money can perpetuate unhealthy cycles.”

Overspending behaviors like overuse of credit, compulsive gambling, an obsession with the stock market or a need to spend money to create a mood change can set children up to fall into the same bad habits.²

On the other hand, parents who are silent about money management are missing an opportunity to develop their children’s financial literacy. Ideally, practicing good financial habits for spending and saving will give your kids a positive model for building good credit and handling money.

Keeping up with the Joneses and social comparison theory

We all know people who have sacrificed financially to buy something, not because they needed it, but to feel like they fit in.

A comic strip in the early 1900s coined the phrase, “Keeping up with the Joneses.” The strip featured a family that struggled to keep up socially and economically with their neighbors, the Joneses. It is an excellent example of social comparison theory: People evaluate their worth, abilities and attitudes by comparing themselves to others.

Peers’ choices about spending, food, and even voting strongly shape how people make decisions, according to social comparison theory. However, comparing yourself to a high-performing peer or a trendy influencer may leave you feeling lackluster. In response to emotional pressure, some people spend money to try to fit in.

Behind this is a strong desire to belong and to have . Fear of being different and peer pressure are the main drivers of spending habits.

Spending to fill a void

“Spending decisions are rarely just about one thing,” said Loretta Roney, President and CEO of InCharge Debt Solutions, an ��ѻ��ýmember. “Many times they’re emotional. Stress, uncertainty and the need to solve an immediate problem all play a huge role.”

Emotionally-based spending emphasizes meeting emotional needs with material goods. Psychologically, it is an unhealthy coping strategy, just like overeating when you feel sad. Studies have found a tie between this impulsive spending and buyer’s remorse.

“When money is spent with the intent of overcoming feelings of insecurity, this leads to greater ill-being through need frustration,” one study found.³

How has spending changed in recent years?

According to recent figures from , consumer debt is rising, but credit card utilization may be declining slightly. What are the drivers of this shift?

Spending in the U.S. has changed a lot recently because of economic pressure, inflation and uncertainty. The average American now has less extra income.

“There is a noticeable reduction in spending on non-essentials, with more [people] seeking help before reaching crisis points,” Opperman explains.

Roney concurs. “Inflation has been the biggest driver,” she says. “Essentials like housing, medical costs, gas and food are taking up much more of people’s budgets. [Our credit counseling] clients are using credit more just to get through the month, while things like saving money or planning for emergencies often get pushed aside.”

Yet, emotional spending and impulse purchases still occur – especially under stress – often followed by regret or anxiety.

How people respond when money gets tight

When finances tighten, spending habits must change as well. Luxury expenses must either be trimmed back or paid for with costly personal loans or high-interest credit cards.

Spending habits become ingrained over time, making change challenging.

“People get used to a certain lifestyle and struggle to completely leave it, even when their income comes down,” said Martin Lynch, ��ѻ��ýPresident.

Many people choose to tighten their financial belt and cut unnecessary expenses. But splurging now and then may still feel justified, especially under peer pressure or emotional stress. If income can’t cover all expenses, people must find alternative ways to pay.

“When normal spending habits start to trend higher for basic needs, then things like clothing, small extras, entertainment or savings just don’t fit into the budget anymore. If they do, that is where some clients start utilizing credit in a negative way,” Roney explained.

“Recently, we’ve seen an increase in payday lending to cover short-term needs, or advances on payroll, which sometimes also come with increased costs and fees,” added Roney.

Debt in the United States has increased by . The was $105,444, including mortgage debt or $21,603 excluding mortgage debt.

Social media, influencers and digital marketing affect spending

Social media and digital marketing often entice people to spend more. Many credit counselors see evidence of these digital influences leading to overspending and debt, rather than providing financial education.

“Social media is a double-edged sword. On one hand, it promotes aspirational lifestyles, fueling FOMO and overspending. We still see clients spending a tremendous amount on Amazon, where buying is constant and almost automatic,” said Opperman.

“On the other hand, trends like ‘loud budgeting,’ ‘joy-based budgeting,’ and thrifting are empowering clients to be more transparent and intentional about their finances. These movements reduce stigma and create communities around mindful spending,” she added.

People who struggle with emotion-based spending are more likely to make purchases when regularly exposed to digital ads.¹

“Social media makes it easy to spend through buy-now-pay-later options. An evening scroll will present constant product recommendations, which can challenge the consumer to feel pressure to buy or spend even when budgets are tight,” said Roney.

Social media showcases sponsored posts and ads paired with influencer posts about products you need to buy. The temptation to give in is common. Holding your ground and saying no is challenging.

“When people are under pressure, using credit often feels like the quickest way to get relief. Many consumers feel they are going to be able to turn around and pay a charge back off, but then another thing, and another thing happens, and the next thing they know they are in over their heads,” shared Roney.

“That doesn’t come from being careless; it comes from being human. The most effective solutions recognize that there is a need to focus on mindset and behavior change just as much as the numbers.”

How can credit counseling help you develop good spending habits?

Credit counseling helps people overcome debt and overspending by offering confidential, unbiased counseling based on each individual’s financial situation. Counselors help destigmatize financial struggles, equip clients with tools to regain control, and address the root causes of overspending.

“Credit counseling can provide education, accountability and emotional support. By helping clients understand their spending triggers and develop healthier money habits, counselors address both the practical and psychological aspects of debt,” said Opperman. “Counseling offers a safe space for clients to discuss financial stress without judgment, fostering positive behavioral change.”

Most people who call an ��ѻ��ýmember agency feel relief and hope after their first call.

“When clients finally talk through their situation and have a plan, we can instantly hear and see the relief,” shared Roney. “Clients regularly use words in our counseling sessions such as guilt, shame and that they ‘should have known better.’ After joining a debt management plan, many clients say they’re sleeping better, and their overall mental health and family dynamics are improving.”

Counseling helps people feel more in control and less overwhelmed, which makes healthier financial decisions much easier to stick with,” she added.

To connect with an ��ѻ��ýmember credit counselor about your spending, money management or debt, click to find a counselor or call 800-450-1794.

References:
1) Mbonigaba, C., & Vanitha, N. (2018). The psychology of spending: Why we buy things we don’t need. International Journal of Advanced Trends in Engineering and Technology, 3(1), 110-116.
2) Carrier, L., & Maurice, D. (1998). Beneath the surface: The psychological side of spending behaviors. Journal of Financial Planning, 11(1), 94.
3) Manganelli, L., & Forest, J. (2024). Spending motives matter: Using self-determination theory to explore the effects of motives for spending on psychological health. Trends in Psychology, 32(2), 541–571. doi.org

The post The Psychology of Spending – Developing Good Spending Habits appeared first on FCAA.

Consider these interesting statistics about couples and money:

• 74% of Americans say .
• 78% of Americans see (drawing the line under $25k).��
• Almost half of U.S. adults (43%) believe .��
• Nearly one in four people have .
• 90% of people say .

Communication is key in relationships, especially talking openly and honestly about money management. In fact, .

“Financial compatibility plays a significant role in long-term relationship stability,” said Kim Cole, Community Engagement Manager for Navicore Solutions, an ��ѻ��ýmember. “Proactive conversations about money can help couples align expectations, reduce conflict and build a shared financial strategy.”

Combining finances, identifying financial red flags and budgeting as a couple are areas you should explore. This article will guide you through how to have a financial conversation with your partner.

Questions to ask your partner about money

If you’re dating or thinking about the next step in a relationship, discussing financial philosophy is important. But asking about your partner’s financial past and money habits can be uncomfortable. Most experts recommend discussing money early in a relationship. According to a , this should happen within the first six months.��

Start your conversation with these financial questions:

1) What current financial obligations do you have? Do you currently have debt, and how are you planning to handle it?

Be honest about your debt and share your repayment plan and timeline. While you may feel uncertain, being honest can actually improve your relationship.

“Full disclosure of your financial situation is important for building trust in a relationship. Knowing about your partner’s student loans, credit card debt, personal loans or other liabilities is essential. Debt affects cash flow, creditworthiness and future financial planning,” said Cole.��

2) How do you approach budgeting and spending? How often should we check in about our monthly budget?

Fights over money are common in relationships, especially when partners are used to managing their money individually.

“Most people can be described as spenders or savers, and the two types are often not compatible,” said Manuel Salazar, CEO of Take Charge America, an ��ѻ��ýmember.

“Setting financial boundaries together and being in agreement on those boundaries sets the foundation for a strong financial life,” advised Cole.

Determine whether you prefer weekly, bi-weekly or monthly budget check-ins to keep your budget and savings goals on track.��

3) How were you raised to think about money? What does financial security look like to you?

Your partner likely formed their views on spending and saving with their family of origin in their early years.

“Financial attitudes are often shaped by upbringing. Understanding these influences provides context for current behaviors and risk tolerance,” said Cole.��

Depending on upbringing, reliance on credit and late payments may feel normal. Other households may have considered earning a lot of money as shameful. These different views could put great stress on a relationship with a partner who handles money differently.

“It can be hard to break away from some financial habits. Regular discussions about money can help you identify flaws in your financial thinking and create new habits,” Cole shared.

If you have credit card debt, you may benefit from the help of a non-judgmental ��ѻ��ýmember credit counselor. They can provide an experienced, outside perspective and help you create a budget and debt management plan.

4) What are your short- and long-term financial goals?

“Understanding whether a partner prioritizes homeownership, entrepreneurship, early retirement, travel or other goals helps ensure alignment in saving and spending decisions,” said Cole.

5) Do you have an emergency fund?

Emergency funds are a stash of cash set aside specifically for emergencies. Learn more about the importance of an emergency fund and discuss it with your partner.

6) How should we divide financial responsibilities?

“Couples should discuss whether expenses will be split evenly, proportionally to income, or handled through another arrangement,” advised Cole.��

“This will look different for every couple. However, it is important that each person has access to and an understanding of the financial situation.”

Make sure your conversation includes the role each partner will play in managing money.��

“Talk about each person’s role in the finances, and make sure the responsibilities are divided based on each person’s natural strengths,” said Amanda Reid-Raper, credit counselor for Consumer Credit of Des Moines, an ��ѻ��ýmember.��

For example, one person might balance monthly transactions because they enjoy problem-solving and working with numbers. The other partner may build and maintain the budget and tracking tools because they like to visualize the bigger picture.

“When both people are involved, and each has a clear role, the odds of success are higher,” said Reid-Raper. “The goal is true partnership, and teamwork is the key ingredient that will get you there.”

The pros and cons of combining finances

Merging finances can impact your life as a couple, depending on each person’s financial habits, priorities and spending.��Managing combined finances is often easier, builds trust and fosters teamwork.

“A successful financial merger, although difficult, is a sign of a healthy, caring relationship,” said Salazar.

Below are our experts’ rationales for combining finances after marriage.

Pros of combining finances in relationships

• Simplifies day-to-day money management with easier bill paying, tracking spending and household budgeting
• Encourages greater financial transparency and reduces secrecy by limiting financial surprises
• Promotes open communication and can reduce misunderstandings around money��
• Fosters a team mindset by working towards shared financial goals like buying a home or saving for retirement
• Can potentially strengthen borrowing power and access to certain types of loans

Merging finances can also present challenges and stressors if partners have different financial habits or expectations.��

Cons of merging finances in relationships

• Loss of independence or flexibility in personal spending – parties may feel their spending is monitored
• Shared financial risk – one partner’s debt, credit issues or poor financial choices can affect the other
• Income imbalances can lead to friction and an imbalance of power in the relationship
• Differences in risk tolerance, saving priorities or spending can lead to disagreements
• Separating joint checking and savings accounts, assets and liabilities can be complicated legally and financially if the relationship ends

Financial red flags in relationships

The ��ѻ��ýasked our member experts about the choices and behaviors that raise warning flags. “Certain financial behaviors in a relationship can signal deeper issues that deserve attention,” said Cole.��

What financial red flags in a relationship should you watch out for?

Lack of transparency

“A lack of transparency around money, such as concealing debt, income or spending habits, can undermine trust and may point to financial infidelity,” said Cole.

“Pay attention to patterns like hidden bills, evasive answers, constant ’emergencies’ involving money, a need to borrow money from you (especially if the explanation is suspicious), or pressure to spend beyond what makes sense. Those are often signs of financial instability or dishonesty,” advised Salazar.

“Secrecy related to finances can be a huge red flag. If one person hides accounts, avoids conversations or has total control over finances, this could create money issues for the couple and overall problems in the relationship,” warned Reid-Raper.��

Chronic overspending

“Overspending can lead to significant debt that can often be hard to get out from underneath,” said Reid-Raper. It can also mask a deeper issue, such as chronic stress, addiction or financial distress.

Avoidance of financial discussions

“When one partner is unwilling to talk about money, it becomes difficult to plan effectively for shared goals and responsibilities,” said Cole.

Restricting access to funds

“Financial control or restriction, where one partner limits the other’s access to funds or uses money as leverage, may indicate an unhealthy power dynamic within the relationship,” warned Cole.��

No shared financial vision

“Without shared goals, financial decisions become reactive rather than intentional. A strong financial partnership starts with a shared vision,” said Reid-Raper.

Major differences in risk tolerance

“Significant differences in investment philosophy or risk tolerance can also become problematic if neither partner is willing to compromise. These mismatches can disrupt long-term financial planning and stability,” said Cole.

Tips for budgeting as a couple

The ��ѻ��ýand our members strongly encourage people to regularly revisit their budgets. People who follow a budget are less likely to get into debt. They often have more financial success than those who just “wing it.”��

Get help creating a budget. Start with this article about how to create a budget. If you need budgeting advice tailored to your specific situation, contact an ��ѻ��ýmember credit counselor.

Be honest and open with your partner about money. Begin all of your money conversations with full transparency. Judgement-free communication is key.

Schedule regular financial check-ins. Find a time that fits your schedules, when you are both calm and prepared to talk. Expect your money talks to be an ongoing conversation, not a one-and-done discussion. Monthly or biweekly discussions help couples review spending, adjust goals and maintain accountability.

“Couples need to create spending plans together, design appropriate insurance coverages together, emergency savings plans together, etc., to make sure there is no duplication of effort and that every need is accounted for,” said Martin Lynch, ��ѻ��ýPresident and Director of Education for Cambridge Credit.��

Establish clear shared goals. Identifying your monthly income, expenses and short- and long-term goals is a great place to start. Then revisit to track your progress.��

“A values-based budget, centered on agreed priorities such as retirement, debt repayment and lifestyle goals, provides direction and purpose,” said Cole.

Working towards joint goals can strengthen teamwork, trust and excitement, helping you stay on track with your savings.��

“Do your best to plan,” encouraged Reid-Raper. “Plan for the expected, like housing, groceries and savings. Also, plan for the unexpected auto repairs, home maintenance and medical bills.”

Maintain personal allowances. ��Merged or separate, every budget should let both partners have a few dollars to spend however they want without review, according to Salazar.

Cole agrees: “An allowance helps to preserve autonomy and reduce conflict.” It’s important for both partners to feel like they have a say in the overall financial picture.

Need more help navigating aspects of couples and money?��

The ��ѻ��ýand our members are here to help with a free consultation, budget analysis and practical debt advice. They can also help with a debt management plan if you’re having trouble repaying unsecured credit card debts. Contact an ��ѻ��ýmember counselor today for more information.

The post How to Talk to Your Partner About Finances appeared first on FCAA.

The past few years have been tough on Americans’ personal finances. Nearly struggle to live paycheck to paycheck, and only can afford a $1,000 emergency expense.

Many consumers want a proactive approach to get their finances on track, according to recent surveys by and . However, creating a strategy to get out of debt, break free from the paycheck-to-paycheck cycle, and build up financial fitness requires effort.

This is why the Financial Counseling Association of America (FCAA) offers debt-challenged families and individuals tools and resources to get financially fit. Think of the ��ѻ��ýand our members as your non-judgmental, experienced debt help coaches.

Just as choosing to live a healthier lifestyle through diet and exercise requires breaking bad habits and forming healthy ones, growing stronger in financial fitness requires doing the same. Below, our team defines financial fitness and offers five tips to help you get financially fit.

What is financial fitness?

Financial fitness describes your overall financial health, including the knowledge, skills, and habits that enable you to manage money well. It includes understanding income and expenses, budgeting and emergency funds, as well as saving for retirement and long-term goals.

People with good financial fitness or financial wellness also regularly review their finances, check their credit score, pay down credit card debt and set financial goals.��The goal of financial fitness is to have a healthy relationship with money.

Similar to creating physical fitness and nutrition plans if you’re trying to lose weight, financial fitness involves discipline, goal setting and regular check-ins to achieve results. To cut back on an excess of debt or to save for a dream vacation, plans must be made for how much income you can make and how it will be saved or spent.

Five tips to get financially fit

#1 Create a budget and stick to it

Take some time today to identify where your money comes from and what you spend it on. Whether written by hand or drafted in a Google doc or spreadsheet, having a list of your income and expenses is foundational.

“Create and personalize a percentage-based household spending plan to identify financial activities you are over or underfunding,” says Todd R. Christensen, author and Housing and Education Manager at Debt Reduction ��ѻ��ý.

If you need help figuring out what should be on your budget, try the FCAA’s budgeting calculator, the Debt Freedom Tool. Or, contact an ��ѻ��ýcounselor to talk through your thoughts and receive non-judgmental, expert advice.

Once you’ve noted your monthly income and expenses, check to see if your expenses exceed your income. If they do, see what you can cut out.

Then track your spending each month to see if you are within your budget. When you stay within your budget, celebrate! Choose a pre-determined small treat (renting a movie or getting a coffee), not a spending binge.

#2 Set up automatic deposits for your emergency fund, retirement savings and short-term goals

Designate a portion of your paycheck to go directly into your savings and retirement accounts. If your employer pays you by direct deposit, this is easy to do automatically. With this simple practice, you’re more likely to save and less likely to be tempted to spend.

Taking small steps like this sets you up to succeed and can make a significant difference in your financial wellness.

Why do you need to save for emergencies and retirement? Because both will happen at some point. Those who are saving and investing will weather the challenges much better than people who have not saved.

“Thinking you can go another year without an emergency fund is one of the biggest pitfalls I see,” said Christensen. “If you aren’t directly depositing something into savings, you will likely spend every penny you earn and end the year the same as last year.”

A good rule of thumb for how much money to keep in your emergency fund is three to six months of living expenses. Emergency savings will protect you from debt if unexpected problems arise. If the water heater goes out or you have an unexpected car bill, you will have a cushion of protection. It also gives you flexibility if you lose your job or a loved one has an expensive medical event.

#3 Check your credit report each year

Review your credit reports each year – for free – at . With the prevalence of identity theft and the changing nature of people’s credit, it is important to know what is actually on your report.

If you find accounts or charges that are not yours, contact the creditor immediately to dispute the charges and close the account. If someone tried to steal your identity, . They will create a personalized recovery plan for you. (Click to read more about how to protect yourself from financial scams.)

Reviewing your credit report can also lead to positive surprises.

“I had a couple come in to review their credit report,” Christensen said. “They came in with shoulders a little slumped and eyes cast down when they told me there would be things on their credit report that they weren’t proud of. As we reviewed their credit reports, we quickly realized the items they were afraid to see had already been removed due to the seven-year reporting limitation.”

Christensen continued: “This couple had intentionally avoided looking into purchasing a home because they assumed their credit rating was too low. As it turned out, they had very good credit. When they left, they had a bounce in their step. Two months later, I ran into them, and they told me they were about to close on their first home.”

#4�� Reduce debts and think carefully before taking on more debt

Over time, credit card bills can snowball and overwhelm people without an emergency fund or a plan to pay off their debt.

Debt can cause significant stress and physical and mental ailments. It can also cause people to miss out on vacations, family time or a better quality of life.

“Overwhelming consumer debt equates to major opportunity costs,” said Christensen. Households that are using their entire current income to pay off past purchases will miss out on:

• Investing in retirement plans, making retirement years harder
• Saving for emergencies, causing stress when the inevitable emergency comes
• Creating memories through shared experiences (travel, gifts, etc.); no cushion in the budget leads to missed opportunities
• Advancing financial goals, like replacing a vehicle, upgrading appliances and furniture or providing for children’s college education

To cut back on debt, consider which services and purchases you can cut and be cautious about taking on long-term financial obligations.

“Avoid contracting for a gym membership you will likely never use,” Christensen advises. “If you can’t get yourself to exercise at home (calisthenics, walking/jogging, etc.), you’re highly unlikely to sustain any habit of going to a gym. Plus, many gym contracts come with onerous terms that don’t permit you to get out of the membership without paying the entire annual contract.”

Also, watch out for tempting sales and offers. “Buy-Now-Pay-Later purchases are specially designed to get consumers to buy more than they can afford,” Christensen warns.

You can try to reduce your debt on your own by using the debt snowball or debt avalanche methods.

The debt snowball method encourages you to pay off the smallest debt you have first. Then use the extra money to pay off the next smallest debt and so on. This results in immediate progress and helps many people keep going on their debt repayment journey.

The debt avalanche method focuses on paying off the debt with the highest interest first. This method saves more money, but may take longer.

Other debt help strategies include debt management plans through a non-profit credit counseling agency (like ��ѻ��ýmembers), debt settlement or bankruptcy. Learn more about each here.

FCAA’s non-profit members offer a free consultation and affordable debt and credit counseling as part of their educational mission.

#5�� Set financial fitness goals

Regardless of your financial situation, planning for your financial future is wise. Just like you set goals to reach a number on the scale or fit into a special outfit, do the same to get financially fit! Set a goal to save for a vacation, a downpayment on a house or long-term retirement.

Consider opening an additional savings account at your bank, and start saving! Set up a direct deposit to help you commit to your goals. Ask about a high-interest savings account to make your money work harder.

When planning for a large expense, reframe your thinking. Instead of putting a large expense on a credit card or financing, can you cut back and save aggressively leading up to the purchase?

“Car payments, just because they’re the norm, are a big pitfall. Big car payments are about the fastest way to get a household into financial trouble,” said Christensen.

“The typical car loan payments are now over $500 per month, but that doesn’t mean they’re a good idea. The average household transportation expenses (payment, insurance, gasoline) should not exceed 10 percent of household gross income.”

Good financial fitness provides benefits

Developing and maintaining good financial fitness builds the strength to overcome temptation, discipline to save, and pride in your good habits.

Healthy financial fitness also builds good credit. Higher credit scores allow you to obtain lower interest rates on car, home or other loans.

Financial fitness also allows for greater generosity, flexibility and enjoyment of life through leisure time, travel, hobbies and more.

Need help getting started?

If you need help developing healthy financial fitness habits, contact one of our member agencies. ��ѻ��ýmember agencies are experts in budgeting, debt and credit counseling, and debt management plans.��

Don’t struggle to build a budget or get out of debt on your own. Tap our trustworthy network of certified, non-profit members whose mission centers around helping people get out of debt, not making money at your expense. Contact an ��ѻ��ýmember counselor today!

Editor’s Note: This article was originally published in January 2024 and was updated in April 2026 with more current information.

The post 5 Tips to Get Financially Fit appeared first on FCAA.

Finances can be confusing. Debt and credit are two aspects of finances that most people deal with at some point in their lives. This article will help you understand what debt mix and a credit mix are and how that information can help you better manage your finances.

Understanding your debt mix and credit mix makes it easier to improve your credit score and opportunities for borrowing.��

What is a debt mix?

A personal debt mix refers to the amounts owed across different types of credit accounts, such as credit cards and car loans. Your debt mix focuses on how much debt you owe and to what type of accounts – either secured or unsecured loans.��

Secured debt is a loan or credit line that is backed by an asset, like a car or a home.��

Secured debt is safer for lenders because, if the borrower stops repaying, the lender can seize the asset. Mortgages and auto loans are examples of secured debt. This means if you stop paying your mortgage, since it is a secured debt, the lender can seize the asset – your house.��

“Secured loans are generally less risky for lenders, so consumers may have more lenient credit requirements, and their payment history on these loans may be weighed heavier when determining credit score impact,” said , Senior Director of Enterprise Learning for MMI, an ��ѻ��ýmember agency.

Unsecured debt is a credit line or loan that does not require an asset to borrow from the lender.��

Credit cards, student loans and personal loans are examples of unsecured debt. If you don’t pay your credit card balance, the lender will not seize your lunch or your new purse. However, paying late or not paying at all will result in late fees, a decline in credit score, debt collection and/or legal action.��

“Student loans are unique because they are unsecured but are treated like secured debt in a scoring model,” said , Director of Strategic Initiatives for American Financial Solutions, another ��ѻ��ýmember. “They are evaluated primarily on payment history and the balance-to-loan ratio rather than revolving utilization.”

What is a credit mix?

The types of credit accounts where you owe money make up a credit mix. In a credit mix, debt is classified as revolving or installment credit.��

Revolving credit accounts include credit card accounts and home equity lines of credit (HELOC). With revolving accounts, you can borrow varying amounts of money up to a certain limit each month. These accounts typically have no set end date.

Installment credit accounts have fixed payments to be made at set intervals (e.g., monthly) over a set timeframe.��

Having and repaying both revolving and installment debt shows lenders that you can manage different types of debt responsibly. According to , “An ideal credit mix includes a variety of both revolving accounts and installment accounts.”��

One way lenders evaluate whether you have a good credit mix and debt mix is to look at your . A FICO score is a three-digit number calculated based on the information in your credit reports.

In a FICO score calculation, 35 percent is based on your payment history. 30 percent comes from amounts owed to lenders. The length of credit history makes up 15 percent of the score, and credit mix and new credit are 10 percent each.��

“Credit scoring models also use an algorithm, so the impact of an action could vary by consumer,” said Alderete.

How do you know if you have a healthy debt mix?

“Knowing your and what it means is a good place to start,” said Alderete.

To find your debt-to-income ratio, divide your total debt by your total gross income. Total debt includes housing, auto loans, credit cards and student loans. Gross income represents the amount of money you make before taxes and deductions.��

“A 36 percent DTI ratio is generally considered reasonable,” said Alderete, but it’s best to aim for an even lower ratio. A lower DTI indicates that you have a better balance of income to debt.

“It’s also important to consider the different types of debt you’re managing and how this contributes to your credit score and overall financial health,” said Alderete. “Your ability to make regular fixed payments on secured loans, like a mortgage or auto loan, could indicate a lower borrowing risk, thereby weighing more heavily in what makes up that 10 percent of your FICO score.”

Does how much unsecured credit you use affect your credit score?

Yes, the amount of your credit limits used on unsecured debt versus secured debt will impact your credit score.��

“The distinction between the debt types comes down to volatility versus predictability,” said House.��

“Credit utilization primarily tracks revolving debt like credit cards and revolving lines of credit. In a FICO credit score, this accounts for 30 percent of the score. Because people can spend, pay and re-borrow, scoring models view high balances as a red flag for financial over-extension.”

However, House explained, installment loans, such as mortgages and auto loans, are fixed. They move in one direction – down – because balances drop as payments are made.��

“Scoring models view these as a sign of stability if payments are made on time. Basically, high utilization on a credit card signals a potential crisis, while a high balance on a new mortgage simply signals a new homeowner,” she said.

Does unsecured debt hurt your credit score more than secured debt?

“It’s not that one type inherently hurts a credit score more,” said House. “It’s how the debt is used.”��

The composition of debt mix is important in credit score calculations. Balances on secured loans drop with every payment. The main factor being measured is payment history – the largest part of a credit score.

“With unsecured, revolving credit – like credit cards – scores consider payment history and how much of the available credit is being used,” said House. “High utilization can lower scores even when payments are made on time, making unsecured debt appear more harmful if balances stay high.”

What hurts your credit score more – missing an unsecured credit card payment or a secured mortgage payment?

“Missing payments on any type of debt will hurt payment history and cause a score to drop,” said House. “Late payments on mortgages and credit cards typically cause a significant decrease, which varies depending on the person’s starting score and their overall credit profile.”

House said borrowers with higher starting scores may experience the largest credit score declines. Since their profile contained less negative or risky information before the missed payment, the event indicates the borrower has become riskier and alerts lenders.

“Mortgage delinquencies often trigger sharper declines because housing payments are viewed as highly predictive of financial stability,” said House.��

There is also the risk of foreclosure on a home or repossession of a vehicle, which can significantly damage a credit score.

If you cannot pay all of your bills, which should you pay first?

“If you’re unable to pay all of your bills, first assess your financial situation to determine your income and expenses. This puts you in the best position to plan, prioritize and negotiate,” said Alderete.��

Then, contact your creditors and service providers to explain your situation and discuss your options. Many creditors have hardship programs available, and they want to help, she shared.��

Next, use all available resources to prioritize payments.��

“Completing a ‘wants versus needs’ assessment can help you determine which expenses are necessary,” Alderete advised. “Typically, these are expenses for things needed to survive, like rent or mortgage, groceries, transportation to and from work, etc.”��

Remember, any missed payment will likely impact your credit score. As you identify options, ask about the impact on your credit score. Also, always get agreements in writing and keep accurate records in case you need to contest fees later.

“If you’re struggling to make payments or have a gap in your monthly budget, reach out to an ��ѻ��ýmember right away,” said Alderete. “It’s never too soon to ask for help and explore your options.”

How does medical debt affect your debt mix and credit score?

“Medical debt is the most ‘forgiven’ type of debt in the credit world because it is involuntary; no one chooses an emergency room visit,” said House. “Newer credit scoring models give less weight to medical bills because they are not a good predictor of how someone will pay their bills.”��

Recent legal updates also impact how medical bills appear on credit reports, House shared. These include:

• Removing paid medical bills from credit reports
• Requiring medical facilities and collection agencies to wait one year before reporting an unpaid medical bill to credit reporting agencies, providing time for insurance payments and for the person to explore other repayment options.
• Preventing medical debt under $500 from appearing on a credit report or score

How can a debt management plan help someone rebalance their debt mix?

A debt management plan (DMP) can help stabilize your finances in two ways, according to House.��

First, a debt management plan consolidates unsecured debts into a single structured payment.

Second, your credit counselor will work with your creditors to reduce interest rates on accounts. This allows more of each payment to go towards the principal of the debt, helping balances fall faster,” said House.

Debt management plans also help rebuild payment history and immediately begin lowering balances.

“Even though a DMP doesn’t add new types of credit, it strengthens the two areas that matter most in someone’s existing mix: on‑time payments and lower revolving balances,” said House. “Over time, this leads to a credit file that looks more stable and less dependent on high‑risk debt.”

For example, American Financial ��ѻ��ý’ client Krysta called in with a credit score of 645 and $80,300 in unsecured debt. After 15 months on a debt management plan, her score rose to 785, and she paid off $26,700.��

“This is a clear example of how improving payment history and reducing revolving balances can meaningfully shift someone’s overall debt mix and credit profile,” said House.

Contact an ��ѻ��ýnon-profit credit counselor today to get help with your debt. Call 800-450-1794.

The post Understanding Your Debt Mix and Credit Mix appeared first on FCAA.

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In life’s unpredictable journey, unexpected events will occur. Often, those with an emergency fund are best prepared to handle them.

Whether it’s a sudden job loss, a major car repair or a medical emergency, life has a way of throwing curveballs that can have serious financial implications. That’s where emergency funds come into play. Emergency savings serve as a safety net for wild pitches during turbulent times.

In this article, we will explore what an emergency fund is, why it’s crucial for your financial health and how to build an emergency fund effectively.

What is an emergency fund?

An emergency fund is a stash of money set aside specifically to cover unforeseen emergency expenses. It absorbs the financial harm that unexpected expenses can bring.

It’s not meant for planned expenses like vacations or a new car, nor is it intended for discretionary spending.

With emergency savings, you are better prepared to handle emergencies that demand immediate financial attention. Consider scenarios like your refrigerator suddenly not working, a speeding ticket or an unexpected medical bill that isn’t covered by insurance.

Instead of reaching for a credit card and accruing high-interest debt, you can tap into your emergency savings and continue your regular financial routine.

Why is an emergency fund important?

“Having a cushion lowers stress, protects your budget, and helps you stay focused on your long-term goals instead of scrambling when something goes wrong,” shared Loretta Roney, CEO of InCharge, a member of the FCAA.

Emergency funds provide financial security, prevent debt, and enable peace of mind and independence.

1) Build financial security

Unexpected expenses can upend even the most carefully planned budget. For those without savings, an unexpected expense can lead to tough financial times.

“An emergency fund provides financial security,” said Tara Alderete, Senior Director of Enterprise Learning at Money Management International, an ��ѻ��ýmember. It serves as a safety net, providing certainty that you have funds to fall back on in the event of a financial setback.��

2) Avoid debt

Without emergency funds, sudden expenses may lead you to rely on credit cards or loans. These can easily spiral into long-term, high-interest debt.

An emergency fund helps you pay for unexpected costs right away and avoid going into debt..

3) Have peace of mind

Knowing you have a financial buffer can significantly reduce stress and anxiety related to money. An emergency fund provides the peace of mind that you can handle financial emergencies when they arise.

4) Gain financial independence

An emergency fund can also foster financial independence. It prevents you from needing to rely on family or friends for financial help during tough times.

How to build an emergency fund

When cash flow is already tight, the thought of putting money into a savings account you’re not going to touch may feel painful. But it IS doable.��

Remember, building an emergency fund is a marathon, not a sprint. It requires consistent effort and good financial habits. Try these strategies to help you accumulate your safety net:

Prioritize savings in your budget

“First, create a workable budget. Set a savings goal and make regular savings contributions a priority expense,” said Alderete. “Doing this will help ensure you continue to build your savings, even while working to pay other living expenses and achieving your overall financial goals, including debt reduction.”

“Cutting small expenses or selling unused items can help, too,” said Roney. “The key is to make saving a habit, even if it’s just a few dollars at a time.”

Need help building a budget? Try FCAA’s free budgeting calculator.

Open a separate emergency savings account and set up automatic transfers

“Automating transfers into a separate savings account helps you stay consistent without having to think about it,” recommended Roney. “If the fund isn’t kept separate, it’s easy to dip into it for non-emergencies, which slows your progress.”

Cut back on non-essentials

Review your spending and look for areas where you can cut back. Maybe it’s dining out less, canceling unused subscriptions, or avoiding impulse purchases. Redirecting small amounts of money to an emergency fund is a great way to get started.

Add extra cash when possible

“When you get a tax refund, bonus or any unexpected cash, put a chunk of it toward your fund to speed things up,” said Roney.

Earn interest on your savings��

Consider keeping your emergency fund in a high-yield savings account. These accounts offer higher interest income than regular savings accounts, helping your money grow faster.

Evaluate your debt and make a plan to pay it off

For those in debt, creating an emergency fund may feel out of reach. While it may make saving more challenging, you can do it.��

“There are several methods to [get free from debt] on your own, such as the ‘avalanche’ or ‘snowball’ method,” said Alderete.��

Avalanche payments pay off debts with the highest interest rates first, while making minimum payments on all other debts. With snowball payments, you pay off the debt with the smallest balance first, regardless of the interest rate.

If you are struggling and need help repaying your debt, reach out to the ��ѻ��ýto connect with a non-profit credit counselor. They can determine if a debt management plan is right for you.��

“Debt management plans work as consolidation without a loan, often providing reduced interest and fees so debt is fully repaid in a shorter period of time,” explained Alderete.

Common challenges to building an emergency fund

Building an emergency fund can be hard when you’re living paycheck to paycheck, like

According to a , nearly a quarter of Americans have no emergency fund. Only about half of Americans (46%) have enough emergency savings to cover three months of expenses.

“The hardest part is usually finding room in the budget,” said Roney. “When every dollar is already accounted for, saving even a little feels out of reach. Even a moderate $400 emergency can push one in three adults to borrow or fall behind on bills.”

Saving a few dollars here and there can make a significant difference and eventually reach thousands over time.

How much to save in an emergency fund

The size of your emergency fund can depend on many factors, including your financial obligations, lifestyle and income stability.��

A common guideline is to save enough to cover three to six months’ worth of essential living expenses. These expenses may include rent or mortgage payments, groceries, utilities, healthcare, transportation and any other necessary costs.

“Begin by setting a realistic and achievable goal – this might be $100,” said Alderete. “Break your savings goal into smaller goals and track your progress. Saving about $21 each week means you’ll have over $1,000 saved in a year.”

“$1,000 covers most small emergencies,” said Roney. “Setting small milestones makes saving feel achievable instead of overwhelming.”

Remember, the goal is to build a fund that provides a sense of security and can cover unexpected expenses without causing financial strain. It’s better to start small and gradually build up than to have no emergency fund at all.��

When to use an emergency fund

Knowing when to tap into your emergency fund is as important as building one. The key word here is “emergency.” This fund is not for planned expenses like a vacation, a new car or regular home maintenance.

Instead, it’s reserved for unexpected expenses that you couldn’t have planned for, and that will significantly impact your life if not addressed immediately.

“It covers financial surprises like a car repair, a medical bill, or a sudden job loss without forcing you to rely on credit cards,” said Roney.

It’s also important to replenish the fund after you’ve used it. If you withdraw money for an emergency, make sure you adjust your savings plan to build it back up. This ensures that you’re always prepared for the next unexpected event.

Create an emergency fund with the help of an ��ѻ��ýcredit counselor

Having an emergency fund is all about being prepared. It gives you the peace of mind that you can handle the financial surprises life throws your way. It’s not just about the money – it’s about financial stability, independence and security.��

��ѻ��ýmember credit counseling agencies help people build budgets, manage their debt and create emergency funds.

“One couple came to us with over $24,000 in credit card debt when they joined the InCharge debt management plan,” shared Roney. “Their counselor walked them through a budget and encouraged them to start a small emergency fund while paying down their debt.

“They built the habit of saving a little at a time. Once the emergency fund was in place, they kept going and eventually built up a vacation fund, too. For them, taking that first step toward saving created the momentum for a new, more exciting goal.”

Contact an ��ѻ��ýcredit counselor today to start saving for life’s emergencies.

The post What is an Emergency Fund? appeared first on FCAA.

Whether it’s expected or out of the blue, losing your job takes a toll – both emotionally and financially. As you wrestle with the changes that come with a job loss, financial uncertainty likely tops your list of concerns.����

Fortunately, there are options for financial help after a job loss or layoff. The ��ѻ��ýasked our member experts for their best advice on what to do after losing your job. Here, we share tips to protect your finances, prioritize your bills, find financial help and avoid common pitfalls after a job loss.��

Current job cuts and financial stressors

According to a recent , American companies cut more than one million jobs in 2025. This made the year one of the worst for job losses in decades.��

Trump’s tariffs, the government shutdown and layoffs also had a major impact on the U.S. economy and consumer finances.��

How can you protect your finances after a job loss or layoff?

“The first step is to stay calm and get organized,” said April Lewis-Parks, Director of Education and Communications for Consolidated Credit. “Job loss can feel devastating, but acting quickly and logically will help protect your finances.”

File for unemployment or severance pay immediately

Immediately identify sources of income, such as unemployment or severance benefits, and apply for them.��

“Approval can take weeks, so apply as soon as possible,” said Russell Graves, Executive Director for the National Foundation for Debt Management. “These benefits won’t replace your full income, but they provide a critical lifeline.”

Next, assess your financial situation��

“Start by reviewing your essential monthly expenses – things like housing, food, utilities and transportation. Determine exactly how much you need to cover those basics each month, and then look for ways to reduce or defer costs where possible,” said Lewis-Parks.

Identify how much cash you have available in your checking, savings and emergency fund. Then review your unemployment income and allocate funds to pay down essential bills first.��

Do not include your retirement savings in your initial assessment, experts advise. Tapping retirement accounts too early can trigger income taxes and penalties and set your retirement plan up to fail in the future.

Look for ways to maximize income

Consider short-term revenue opportunities, like delivery work or substitute teaching, that can be done while searching for a permanent position, advised Manuel Salazar, CEO of Take Charge America.

“Remember, [finding a new job] usually takes at least a few weeks from application to employment in a well-paying job, so don’t wait to begin the job search process,” said Salazar.��

Preserve as much cash as you can��

“That means stopping all unnecessary spending and living on a crisis budget,” said Salazar.

He recommends making drastic changes immediately, such as eliminating dining out, unnecessary car trips, and lottery tickets. “Cancel all subscriptions and say no to all solicitations. Whatever cash exists, and whatever credit exists, should be preserved.”

Graves advised cutting back on extra debt payments and only paying minimums.

To best manage your cash, Graves said, “Focus on essentials, track spending weekly, and use tools like budgeting apps or spreadsheets. Or, go old school and use a small notebook to jot down every time you spend money.”

Contact your creditors and service providers early

“Many creditors, from mortgage companies to auto lenders to credit card companies, will work with customers to provide some relief,” said Salazar.��

“Some may add a payment at the end of a loan and forgive an immediate payment. Some may temporarily lower interest rates. Many lenders have a defined hardship plan for consumers who lose a job.”

The key is, you have to ask, added Graves.��

��ѻ��ýmember credit counselors can provide guidance on working with your creditors. They can also help you find ways to best use your available resources and credit.��

What bills should you pay first?

When income is limited, prioritize the most essential bills first – those necessary for you to survive. If you lose your job, pay these bills first:

1. Housing – Stay current on your rent or mortgage if possible. Losing your home will make recovery much harder.
2. Utilities – Electricity, water and internet are necessities for daily life and job searching.
3. Food and healthcare – Maintain access to basic nutrition and necessary prescriptions.
4. Transportation – A vehicle or bus pass enables you to get to job interviews, part-time jobs and sources of aid, like food banks. Be aware, there are very few sources of assistance for car payments.��

“The next bill to be paid is the one with the greatest penalty for late payment – typically a credit card that did not agree to a temporary hardship plan or was not contacted in order to keep one card in a usable condition,” advised Salazar.

“If the crisis lasts much longer than a month, bills should be paid on a rotating basis to avoid losing utilities and to prevent collection calls.”

Where can you find financial help after a job loss?

Financial help for unemployed people is available. Our financial counseling experts suggest these resources:����

• – This site will direct you to your state benefits, including SNAP, Medicaid, COBRA (for health insurance) and the Low Income Home Energy Assistance Program (LIHEAP) for energy bills.
• – This site connects people to local assistance programs, including food, housing and utilities.��
• – Military veterans may be eligible for VA programs and assistance. The National Veterans Financial Resource Center (FINVET) is one such resource.
• – If you are 62 or older but have not taken Social Security, consider drawing retirement benefits. Talk with a financial counselor about the pros and cons of this strategy.����
• Financial Counseling Association of America – Our non-profit organization connects people to certified credit counselors who can help them map out next steps based on their income and debt level.
• Local nonprofits and credit unions – Search online to find programs in your state or local area. Many local programs offer emergency grants or temporary financial help.

How can you prevent falling into debt after a job loss?

No one wants to come out of a period of unemployment deeper in debt. These tips can help you reduce or avoid debt, despite the financial uncertainty.

• Manage your budget well. “Revisit your budget weekly and keep a close eye on your spending. Try to maintain enough savings to cover one month’s essentials while you search for new income,” said Lewis-Parks.
• Find a side hustle. “Part-time work can help, as long as it doesn’t create more stress or cost money upfront,” advised Lewis-Parks. Think about gig or freelance work that uses your existing skills. You could try delivery driving, tutoring, pet sitting or selling items online.��
• Keep your hands off your retirement savings. Tapping a 401(k) should be a last resort, according to Graves and Lewis-Parks. If you take early withdrawals, you’ll likely face taxes and penalties. You may also lose future growth potential that could significantly hurt your retirement security.��
• Recognize the risks of personal loans. Personal loans can sometimes bridge a short gap, but they come with risks like high interest rates and credit score impacts if you fall behind on payments. “Taking on new debt without a steady income can dig a deeper hole. If you must borrow, keep it small and short-term, and compare lenders carefully,” said Lewis-Parks.
• Take a mediocre job with benefits while you continue to search. “Even if it isn’t a good job and even if it is minimum wage, having a job is good for morale and good for cash flow,” said Salazar. “That doesn’t mean abandoning the real job search, but few people can go months without a paycheck and health insurance.”

Financial pitfalls to avoid after losing a job

Losing a job can be traumatic, and different people react differently to the experience. To recover from a job loss, focus on what needs to happen, organize yourself and take positive steps forward.

“The biggest mistake is ignoring the problem,” said Lewis-Parks. “Many people go into denial and keep spending as if nothing has changed, hoping to find another job quickly. That’s when credit card debt starts to spiral.”

Ignoring bills and using credit to maintain your lifestyle will put you on a dangerous path.��

“Silence can lead to collections and credit damage, so communicate early. Creditors have in-house temporary programs to assist, with some offering no payment required for a period of time, and others requiring interest only,” said Graves.

On the other hand, acting out of emotion with your finances can also sabotage your efforts. Avoid cashing out retirement accounts or maxing out credit cards. And don’t take on unnecessary new debt. High-interest loans or cash advances can quickly add up and trap you in debt.��

How a credit counselor can help after a job loss

“Losing a job can feel overwhelming, especially when bills are mounting and the future feels uncertain. However, you’re not alone. There are steps you can take with a credit counselor right now to help stabilize your situation,” said Graves.

��ѻ��ýmember credit counselors can help you review your budget, identify immediate needs and find ways to cut expenses. Because of our existing relationships with creditors, we can easily help you find and access your creditors’ hardship programs.

Furthermore, ��ѻ��ýmembers have many resources to help unemployed people. Our members can help you identify unemployment benefits, local assistance programs, upskilling or reskilling programs and temporary work options.��

Connect with an ��ѻ��ýmember credit counselor for help today. Start by clicking here.

The post Financial Help After a Job Loss appeared first on FCAA.

Want to make a dramatic difference in your personal finances? The ��ѻ��ýand our members recommend building and living within a healthy budget. Follow these tips on how to make a budget that will stick!

A budget is a plan that outlines how you intend to allocate your income to cover expenses and achieve your financial goals. Budgets show where your money comes from and where it goes each month, keeping your finances organized and more manageable.��

This article will discuss the value of creating a budget, offer practical tips to make a budget, share common mistakes or pitfalls and ways to stick with your budget.

Why create a budget?

Understanding your finances – where your money comes from and where it goes – relieves stress, enables independence and helps you plan for the future.��

• Having a budget relieves stress. Rising inflation, job changes and economic uncertainty cause anxiety for many people. Having a budget relieves some of this pressure by enabling you to better react to changes.

“A budget gives you the ability to ensure that your expenses don’t exceed your income and to plan for future expenditures. It is your most powerful tool in achieving both short-term and long-term financial health,” says Lara Ceccarelli, credit counselor and team mentor at American Financial Solutions, an ��ѻ��ýmember.

• Having a budget enables independence. When you have a plan for your monthly income and expenses, you have more control over how to spend or save your money. Following your budget prevents overspending and helps you pay off debt, save for an emergency fund, invest your money and grow in financial independence.��
• Having a budget helps you plan for the future. Everyone has future goals, and often, those goals require money. Whether you are paying off student loan debt, saving for a house, sending kids to college or preparing for retirement, a budget will help. “Budgets arm you with the knowledge you need to meet basic monthly expenses and the knowledge to plan for emergency expenses or sporadic, larger costs (vacations, insurance premiums, veterinary expenses, etc.),” says Ceccarelli.

How to make a budget

Building a budget may feel like a difficult task, but with a little organization, you can create a workable budget.��

To make the process as easy as possible, try the FCAA’s budgeting calculator – the Debt Freedom Tool. This tool is a free, helpful resource available with no strings attached. It will ask all the questions you need to answer to develop your budget. At the end, it will provide you with a free copy of your budget, recommendations for debt help and the opportunity to connect with a certified credit counselor, if desired.��

To tackle the task of building a budget on your own, follow these steps:

Define your goals

Remembering why you are going through this process and what you hope to accomplish will help you remain committed and achieve your goals. Write your goals down or create a vision board – whatever will inspire you to keep going.

Determine your take-home pay

Figure out how much income you actually bring home each month after taxes, retirement contributions, insurance, etc. If your income fluctuates, track it so you can determine an average.

Organize your bills

“Gather every recent statement you can find from the last few months, then separate them [by month, then by priority],” advises Martin Lynch, president of the FCAA.

“Focus on the major recurring expenses first, such as rent or mortgage, utilities, car payment, insurance, etc. Ideally, have a few months’ worth, as that will help you determine what a typical month’s expenses are.”

Each month’s bills should be sorted according to their importance in the following categories: needs, wants, debt and savings.

Needs – Include major recurring expenses, as well as retirement contributions and food bills (though these may fluctuate throughout the year).

Wants – Expenses that are not critical to your or your family’s survival. This could include eating out, entertainment, most subscriptions or other items you splurge on.

Debt – This includes student loans, personal loans and credit card debt.

Savings – Include your emergency fund, retirement savings and any other savings.

Don’t forget to add expenses that may not come up every month, advises Lisa Ohnemus, director at Consumer Credit of Des Moines, an ��ѻ��ýmember. Set aside money for car repair bills, insurance payments and holiday spending. Also, make sure to track your spending for dining out and small everyday expenses. They add up!��

Add all expenses to a spreadsheet or budget tracking app

Once all expenses are listed, you can start monitoring your spending habits. Keeping good records is the first step to seeing what you are spending each month and what category most expenses fall into.��

Choose a budgeting strategy that fits

“There are a plethora of effective budgeting strategies. If you try one and it doesn’t work for you, try another,” advises Ceccarelli.��

A common strategy is the 50/30/20 method. This means that you use 50% of your income to cover your needs. The remaining half would be split to cover your wants (30%) and fund your debt and savings (20%).��

Other budgeting methods include a similar 60/30/10 method, an envelope or cash-stuffing method, and more. Find one that works for you.��

Track and adjust your budget

Track your income and expenses each month. Watch for fluctuations and adjust your budget accordingly.

Some months you will spend more, perhaps because of a holiday or a cluster of birthdays. In other months, you should spend less. The goal is to find a balance.

You can use a budgeting app (make sure it’s trustworthy first!) or calculate your budget on a spreadsheet or on paper. What truly matters is that you have an accurate, working budget.��

If you need help, a non-profit ��ѻ��ýmember credit counselor can walk you through the process, answer questions and offer helpful suggestions. Our members’ counselors are all certified and trained. As nonprofits, their goal is to help you as best as possible, without judgment.��

Common budgeting mistakes and pitfalls

Creating a budget can be quite simple, but there are things people overlook or discount that should be on your radar. Keep away from budgeting pitfalls with these tips:

Allow flexibility but track accurately

“A budget is simply a way to see where your money’s going so you can stay focused on what matters,” says Ohnemus. “A few common mistakes when building a budget are making it so tight there’s no wiggle room … and just guessing instead of tracking real numbers.”

Apathy about small or fluctuating expenses

Watch out for small bills and fluctuating expenses, warns Ceccarelli. “It’s easy to fall into the temptation of saying, ‘This subscription is under $20, so it isn’t worth tracking.’ The problem is that people very rarely have only one small recurring cost. Even a $5 or $10 expense can add up if there are several of them.”

Additionally, it’s harder to manually track a fluctuating expense, like gas or groceries, than it is to track a fixed cost, like rent or a mortgage. “People tend to discount the role that these fluctuating expenses play in their monthly budget,” explains Ceccarelli. The numbers are harder to ascertain, leaving the person at risk of a serious shortfall at the end of the month or pay period.”

Revisit your budget again and again

“Remember, a budget is a living document. If you forget a few things or make a mistake, it isn’t the end of the world. It’s only bad if you don’t then adjust your budget,” says Sam Hohman, CEO of Credit Advisors Foundation, an ��ѻ��ýmember.��

“Budgeting is not a ‘set it and forget it’ activity. Just like a road map, you have to keep referring to it to make sure you are on the right course,” Hohman says.

How to stick to your budget

Sticking to your budget is just as important as making a budget. Below, our experts share their top tips for sticking with your budget:��

Remember the big picture

“If you’re taking the time to create a budget, there’s probably a reason for it,” says Ceccarelli. “On days when it feels impossible to stick to your spending plan, remember your long-term goals and be kind to your future self.”

“Passing up the coffee shop can be miserable until you realize you are one step closer to home ownership or a new car or whatever it is you are saving for,” agreed Hohman.��

Think concretely about your dream

“Sometimes, it’s easier to think of your money like pieces of your dream,” Hohman added. For example, consider forgoing a new pair of shoes or a pricey dinner out and instead save for the new sofa you have been wanting for your home.����

Make your budget sustainable

“People often try to implement an austerity budget when they first start. The problem is that budgets are a lot like diets. If you tried to eat salads every day for breakfast, lunch and dinner, you would (in all likelihood) eventually break down and eat a pizza. Budgets function the same way,” says Ceccarelli.����

“If you cut all discretionary expenditures and leave yourself without any recreational outlets, you’re likely to end up frustrated and eventually walk away from your efforts. That’s why it’s important to build in some ‘mad money’ that you can spend on something you enjoy.”

��ѻ��ýmember counselors are here to help

The peace of mind you will gain from building a sustainable budget can be life-changing. A budget can help you organize your finances, obtain independence and achieve both short and long-term goals.��

FCAA’s non-profit member agencies are here to help you. As non-profit organizations, their goal is to help you build a budget and get out of debt. Their specially trained counselors can help you create a realistic budget and advise you on the best ways to get out of debt. Contact an ��ѻ��ýcredit counselor today to learn more.

The post How to Make a Budget appeared first on FCAA.

The post Financial Options for Government Workers Affected by the Shutdown appeared first on FCAA.

Please note that the shutdown will not only affect federal workers. It will also impact people working for federal contractors, the stores and businesses where those people��shop, the creditors they may be unable to pay, etc. A shutdown of even just a few weeks can be enough to produce a significantly negative ripple effect across our entire economy.

The most critical takeaway at the moment is that federal workers are��guaranteed backpay��during shutdowns, but those workers employed by��contractors are not.

Furloughed vs. essential (“excepted”) federal workers

Federal workers typically fall into two categories during a shutdown. Furloughed employees will neither work nor receive pay. Essential employees (also referred to as “excepted” workers in the federal guidance that follows) are required to work but will not receive pay.

• Unfortunately, federal workers deemed essential are required to work without pay and are currently not eligible for unemployment insurance (UI). Essential employees are already eligible for backpay, but UI could help tide them over, particularly if the shutdown goes on for weeks or months.
• Government employees who are furloughed may be eligible for unemployment insurance. The UI program for federal civil servants is called Unemployment Compensation for Federal Employees (UCFE).

How furloughed federal workers can apply for unemployment compensation

• UCFE is administered by the states, so you’ll need to apply for UCFE in the state where you work.��You can find your state UI agency and application��.
• States will verify your federal employment and earnings.��States typically use two forms to verify this information: Standard Form-8 (SF-8) or Standard Form-50 (SF-50). Unfortunately, many workers may not have received these forms as the shutdown approached. The U.S. Department of Labor has also warned��that there may be delays in federal agencies’ verification of workers’ employment.
• You can still apply without agency forms or verification.��Workers can support their applications with an ES-395 affidavit, “Claimant’s Affidavit of Federal Civilian Service, Wages and Reason for Separation” – available through their state agency – or they can use the form��. This form can be used to confirm that you work for the federal government and also as proof of your earnings (such as through paystubs or W-2 forms). Please note, however, that if the federal agency you work for subsequently provides information that conflicts with your ES-395, you may have to repay some or all of those benefits.
• State eligibility criteria, benefit amounts and processing speeds will vary.��Most states have implemented a mandatory one-week waiting period to receive benefits. While each benefit formula varies, workers can expect to receive a benefit of about one-third to one-half of their salary, up to a maximum benefit. A full table of the minimum and maximum weekly benefits is available�� and includes information as of January 2025.
• If you have difficulty applying for or receiving benefits, you should contact the corresponding state unemployment insurance agency, your union or UI advocates in the state where you’re claiming benefits.

Be advised: backpay and repayment of benefits

If you’re a furloughed worker who received back pay after the shutdown ends, you’ll likely have to repay any UCFE benefits you’ve received. While state laws vary, you’ll most likely be found to have a UI “overpayment,” which the state will then seek to recover. As soon as you’ve received back pay, you should repay your state, as the agency could charge penalties for not repaying overpayments in a timely manner.

Layoffs vs. voluntary separation

If the Administration fires or lays off federal workers, they should be entitled to UCFE. However, workers who receive Voluntary Separation Incentive Payments or take part in a Deferred Resignation Program may not qualify if their separation is determined to be a voluntary resignation without good cause.

The following guidance was published by the federal Office of Personnel Management.

Shutdown of federal operations – What does it mean to me?

In the event of a federal government shutdown, Federal employees may be eligible for Unemployment Compensation for Federal Employees (UCFE). The UCFE program is administered by state unemployment insurance (UI) agencies acting as agents of the Federal government. The program is operated under the same terms and conditions that apply to regular state UI. In general, the law of the state in which an individual’s official duty station in federal civilian service is located will be the state law under which an individual’s eligibility for benefits is determined.

What is a government shutdown?

Every year, Congress appropriates funds for federal agencies to operate in each fiscal year. In the absence of either a signed appropriations or a continuing resolution, federal agencies must “shut down” – that is, cease normal spending.

Which federal employees are affected?

When there is a shutdown, not all government operations cease. Expectations generally provide for the continuation of activities involving national defense, law enforcement and other activities directly involved with the protection of life and property. In addition, employees not paid from appropriated funds and those “excepted” to administer shutdown operations will continue to work.

Pay status during the government shutdown

During a government shutdown, employees who are not required to work under one of the exceptions above may not even volunteer their services. Employees not required to work are “furloughed,” that is, placed in a non-pay, non-duty status, until the shutdown ends.

Will “excepted” employees be paid?

Employees designated as “excepted” who continue to work during the shutdown will almost certainly be paid for this period. However, this requires specific Congressional approval and that has occurred in the past.

Am I eligible for unemployment benefits?

State UI laws regarding eligibility vary. You may apply on or after the first day you are furloughed. The state where you file your claim will determine your eligibility. In general, furloughed employees should be eligible as long as all other state eligibility factors are met.

How do I file an unemployment claim?

Contact the state where you worked to file a claim. To find contact information for your state, please visit . Employees may be asked to provide proof of wages, such as an earnings and leave statement or Form SF-50 and may also be asked to provide a Form SF-8.

What is the weekly amount of UCFE benefits paid, and how long do benefits last?

Most states pay a maximum of 26 weeks of regular benefits. The maximum weekly benefit amount of UCFE is based on the state law. The amounts will vary.

How soon will benefits begin to be paid?

Some states require individuals to serve a waiting week, which means that the first week after a claim is filed is an unpaid week. In general, most states will issue payments to eligible individuals within 14-21 days after the claim is filed.

What will happen if federal employees are paid for time during the government shutdown period?

Should an appropriation or continuing resolution occur that retroactively provides for the payment of salary, state and Federal UI laws governing benefit overpayments will need to be applied to those weeks in which benefits were paid.

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