Posted by: Richie Bernardo

1. Main Findings
2. Ask the Experts
3. Methodology

Main Findings

Embed on your website<iframe src="//d2e70e9yced57e.cloudfront.net/wallethub/embed/20496/geochart.html" width="556" height="347" frameBorder="0" scrolling="no"></iframe> <div style="width:556px;font-size:12px;color:#888;">Source: <a href="http://ift.tt/2yH8QcL;  

Overall Rank	State	Total Score	‘Spending & Debt’ Rank	‘WalletHub Financial Literacy’ Rank	‘Credit’ Rank	‘Saving’ Rank
50	Arkansas	36.03	42	47	43	49
51	Missouri	35.48	32	51	30	37

 

Ask the Experts

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• Vicki Jobst Assistant Professor in the Undergraduate Business Department at Benedictine University
• Pam Smith Presidential Teaching Professor and KPMG Professor of Accountancy at Northern Illinois University
• Sandra Poirier Professor in the College of Behavioral and Health Sciences at Middle Tennessee State University
• Sean Stein Smith Assistant Professor in the Department of Economics and Business at Lehman College CUNY
• Cliff A. Robb Associate Professor of Consumer Science and Faculty Director of Consumer Finance & Financial Planning in the School of Human Ecology at the University of Wisconsin-Madison
• D'Arcy Becker Chair and Professor in the Department of Accounting at the University of Wisconsin Whitewater
• Wayne Kelly Chair & Professor of Finance, Real Estate and Business Law at the University of Southern Mississippi

Vicki Jobst Assistant Professor in the Undergraduate Business Department at Benedictine University What tips do you have for consumers looking to make a budget and stick to it? Write down everything you spend in a week, day, or month, and compare it to your budget for that period. You will only have to do this for a short time before you realize what things you are wasting your money on, and how you can improve your spending. What is the biggest obstacle for consumers trying to stay on budget? The biggest obstacle is that consumers do not realize what they are spending their money on. When they become aware, they can control their spending habits. What tips do you have for consumers to get out of debt and stay debt free? Figure out which credit card you can pay off the soonest, and after you do, use that extra money to pay off the next card. Stay debt-free by putting aside an amount from every paycheck (through direct deposit) in a savings account for emergencies. That way, you will not have to borrow when an unexpected purchase arises. How should parents teach children about the importance of financial responsibility? Parents should give their children a chance to make spending choices on their own, but also be taught to put aside money for savings. Parents should stress that the more money they have, the more choices they can make that will lead to their accomplishment of personal goals. Pam Smith Presidential Teaching Professor and KPMG Professor of Accountancy at Northern Illinois University What tips do you have for consumers looking to make a budget and stick to it? A budget is nothing more than a plan. Come up with a plan that makes sense for you and you can consistently implement. For example, allow yourself only one meal out a week, or one Starbucks latte a week, or plan to save $50 a week. Often it is the spending on the “little” things that add up and erode our earnings. The big-ticket items also impact our savings, but those purchases do not occur as often. Big purchases should be thought of as a “need” or a “want.” Do I need a new car, or just want a new car? If you can answer those questions on the big-ticket items, it will help temper unnecessary purchases. Set up a plan for weekly purchases, you would be amazed how easily $100 of “pocket cash” can disappear in one week’s time. What is the biggest obstacle for consumers trying to stay on budget? The biggest obstacle is usually impulse purchases. That is why a plan (or budget) is beneficial -- it will reduce impulse purchases. The best way to stay on a budget is to keep your long-term goal in mind and remind yourself of why you want this goal. There is a saying that “discipline is remembering what you want.” Remembering your long-term goals will help eliminate impulse purchases. What tips do you have for consumers to get out of debt and stay debt free? Same advice as above. First, don’t live beyond your means. Second, develop a budget and stick with it. Third, keep reminding yourself of the long-term goal, it will help keep you on track. How should parents teach children about the importance of financial responsibility? Parents have a huge influence over their children’s perception of financial responsibility. I may be a bit old-fashioned, but I believe that kids should have a “job” where they learn the value of earning funds to support their goals. Of course, the job should be age-appropriate. Understanding that when they earn money, they then have the responsibility of deciding how to spend (and save) their earnings. For example, if you child gets $10 a week for their chores, they should save 20% and decide how, when, where and why to spend the rest. Help your children understand choices that have short-term and long-term impacts on their earnings. Maybe they want to save for a month for something “bigger,” or maybe they want to spend the earnings each week. Understanding the trade-off of immediate gratification versus long-term goals is an important lesson and will serve them as they grow into adulthood. Sandra Poirier Professor in the College of Behavioral and Health Sciences at Middle Tennessee State University What tips do I have for consumers looking to make a budget and stick to it? As a couple, create a budget that is realistic and agreed upon by both individuals. The final budget should reflect your short- and long-term goals. Celebrate together when budget milestones have been achieved. Base your budget on your basic needs, and not your wants. You can incorporate into your budget how you will be saving over time for some of your wants. What is the biggest obstacle for consumers trying to stay on a budget? Unplanned expenditures, e.g., illness, extreme weather damage to your property, death in the immediate family, high automobile repairs, sudden change in a marital relationship are just a few. Another major obstacle is focusing mainly on the present, and not visualizing what your future could be if you were more self-disciplined in spending habits. What tips do you have for consumers to get out of debt and staying debt free?

• Don’t spend more than your take-home pay.

• Know your debt by tracking on a spreadsheet every cent you spend in an entire day, week, and month. This will develop an awareness after one month of how you spend your take-home pay.

• Limit the number of credit cards you use each month.

• Pay your credit card balances in full every month whenever possible, and always pay your higher-interest credit card bills first.

How should parents teach children about the importance of financial responsibility? Begin teaching children about money at a young age. Generally, at four or five years of age. Young children can begin to learn some basic concepts of saving, needs and wants, making choices, etc. Provide a piggy bank and enthusiasm for each penny dropped into the bank. At this young age, children can also participate in helping with the family chores. Allow them to work with the parents to set-up a weekly schedule and what chores each child will be responsible for during the week. Assign a designated amount to be paid if all chores are completed in a timely manner. Gradually, as the child gets older, additional responsibilities can be added to the list of chores, with an appropriate increase in their allowance. Sean Stein Smith Assistant Professor in the Department of Economics and Business at Lehman College CUNY What tips do you have for consumers looking to make a budget and stick to it? The top two tips I have for consumers seeking to put together a budget and stick to it would be as follows. First, find a budget buddy, which is a person that is on the same financial path as you are. Having this moral support will help you stick to your goals, and add some extra motivation when you encounter the inevitable bumps in the road. Second, be sure to set different goals for different stages of your financial life. Short-, medium-, and long-term goals will help focus your financial planning and budgeting process. What is the biggest obstacle for consumers trying to stay on budget? A big obstacle that I have seen when speaking with clients and other individuals is that many people just do not know how to start. Writing down your goals has been proven to help increase your odds of achieving them -- your budget process is no different. What tips do you have for consumers to get out of debt and stay debt free? The suggestions that I most often provide to consumers seeking to reduce their debt levels can be summarized into the following two buckets. Choosing your preferred method for paying down debt, whether it focuses on higher-interest debt first, your largest debt burden first, or some other method of debt repayment, is the key to paying off your debt. Another item I usually recommend that consumers leverage technology to automate their debt repayment as much as possible -- setting up a separate savings account to use for debt repayment is a great way to get this process started. Cliff A. Robb Associate Professor of Consumer Science and Faculty Director of Consumer Finance & Financial Planning in the School of Human Ecology at the University of Wisconsin-Madison What tips do you have for consumers looking to make a budget and stick to it? Often, I recommend people start by engaging in a simple plan of tracking their expenses for a period of a few months. This is critical for helping people to understand their current behaviors, and to identify trouble areas that might need attention going forward. Breaking expenses into categories of importance is another important step, and considering which spending categories have flexibility in the short run can be especially helpful. Over the long run, all expenses are variable to an extent, so individuals should really consider how each spending category influences their lifestyle (positive or negative). Everything should be on the table, and by taking this sort of start-from-scratch approach, households can be more honest about their needs, wants, and goals for their money. Establishing an initial budget is really just a small step towards effective budgeting, as it is sticking with the budget that can be a challenge. What is the biggest obstacle for consumers trying to stay on budget? In a lot of cases, the biggest obstacle to implementing a new budget or sticking to a spending plan is the fact that the plan/budget is new. It is always difficult to establish new habits as it takes a lot of concentration, dedication, and practice over many months to really solidify a behavior. This is further complicated by the fact that many consumers do not find it easy to track all of their expenses on a daily basis, given already hectic schedules or poor existing spending habits. I think that it is important for people to be realistic with themselves from the start, acknowledging that they likely will not be perfect from day one. The point of a budget is not to always stick to it perfectly, but rather to create a path for your resources that is reasonable and beneficial for the household or individual. Anyone who is starting out will find this extremely difficult, so it is good to have a positive attitude and be willing to give yourself grace when you falter. Over time, with practice, one will find that the process becomes more manageable. What tips do you have for consumers to get out of debt and stay debt free? Getting out of debt can be tricky if individuals have accumulated significant balances and lack adequate liquidity to handle large, unexpected expenses that are pretty much the norm (that is, they are unexpected only in the sense that their exact timing is uncertain). I think that there are several standard recommendations out there that are good, including focusing on paying off debt with the highest interest rate first. That being said, I do think that there is also something to be said for the psychological benefits of a win. In some cases, it might be reasonable to take on a smaller debt balance simply due to the fact that it can be retired more easily. Seeing a line of debt actually go away can be very freeing emotionally, and may provide the extra impetus needed to stick with a tough spending plan geared towards debt reduction. I am not a huge proponent of closing cards or accounts once they are paid off, simply due to the fact that the existing available credit can be helpful for your credit history and score. I do think it is wise to consider whether the credit is needed, what it would be used for, and how one might consider making it more difficult to access in the future. How should parents teach children about the importance of financial responsibility? From a modeling perspective, parents should be proactive. I believe that parents need to not only formally discuss and explain family financial practices, but also, they need to work hard to demonstrate behaviors that support good practice. Much of what children learn about finances comes from observations of parental behavior. So, it is critical that parents think about effective modeling. Even in households where parents do not believe that they are teaching anything to their children, classes are (informally) in session. Parents have to take responsibility for their own financial behavior, and helping their children to understand the ins and outs of financial management can be a powerful lesson. In some cases, parents may feel insecure in their own practices, and it is very reasonable to have personal doubts in an area like personal finances, where so many Americans seem to feel out of their depth. In that case, I would encourage parents to be proactive knowledge seekers, and show their children how to be thoughtful about their sending, saving, and planning decisions. Ask questions and do not be afraid to admit when you are not sure of something. D'Arcy Becker Chair and Professor in the Department of Accounting at the University of Wisconsin Whitewater What tips do you have for consumers looking to make a budget and stick to it?

• Don't start by making a budget. Start by tracking how you spend your money right now. Keep track for 2 or 3 months. Where does your money get spent right now?

• Then decide if you have any longer-term goals, like buying a house, moving into a better apartment, or getting a different car -- and how fast you'd like to get there. For example, you may want to save $10,000 toward a new car, and achieve that over 2 years.

• Next, decide what current spending can be reduced to help work toward that longer goal. In my example, you would have to reduce other spending by $416/month. For most people, that would be really burdensome. This helps you adjust that goal in mentioned above to something realistic. If you think you could save $210 a month in other spending -- you'll have $5,000 after 2 years. Maybe that is enough to help buy that new car.

• Write down your new spending plan. That's your target. A budget is a plan, not a set of limits. Be sure to mark every main cost in the budget as “must pay” or “choice.” It really helps to identify the money you're spending because you “choose” to pay it. Rent is “must pay,” and coffee is “choice.” Buying lunch is “choice.” Ordering pizza is “choice.” If you have credit card debt, your plan must include some debt repayment beyond the minimum payment every month as a “must pay.”

• Keep track of all of your spending and compare what you spend with your plan every 2 or 3 months. Do not worry about the budget every day. Stuff will happen each month that isn't in the plan -- when the amount seems like a lot, get the budget out and look at where you might cut back this month to cover that unexpected cost. Since your income in the plan (budget) is probably a fixed amount, don't just let those unexpected costs lead to credit card debt.

• Think about adjusting your spending plan (budget) every 6 months or so if your spending and the budget are really far apart. Stats show that just tracking your spending introduces a form of financial responsibility -- same idea as tracking the food you eat helping you eat less candy.

What is the biggest obstacle for consumers trying to stay on budget?

• They look at it as a huge change from what they are doing, rather than an evolving process depending on what's currently going on in their lives.

• They blow the budget on special occasions, like their kid's birthday or Christmas, and then wind up incurring more debt.

• They think only about the spending side of the budget, when in reality, for most people, getting a better paying job is truly the best route over time. Think about how to get paid more -- if you are passing up weekends or evening shifts in favor of weekday work, try one weekend day a month (if it pays more). Arrange day care shifts for that day in advance, and fit it into your life. Or think about something you could do if you had more training or education. Thinking of your current income as all you're ever going to make is hard.

What tips do you have for consumers to get out of debt and stay debt free? Pay off credit card debt using a plan to pay more than the minimum amount monthly. I don't agree that people should be debt-free. You cannot get ahead in life by paying cash for everything. Buy a car one time (at a reasonable rate) -- making those payments build your credit up, so you can eventually buy something bigger. You have to participate in the banking system to build credit. How should parents teach children about the importance of financial responsibility?

• Talk about how much things cost when the kids are asking for them. Talking about money in the abstract doesn't work -- it has to be at the time, and age-appropriate.

• If a 5-8-year-old wants lots of stuff, you should agree on how many you're willing to buy (let's say, in a month). Young kids usually don't understand money. So, you might agree on one toy on the first Saturday of the month. But then stick to it. If it isn't toy-buying day, the answer has to be “no.” And no allowance.

• Kids 9-12 will begin to understand the abstract idea of money. They are too young to control money themselves, so still no allowance. But you can have a dollar amount you will spend to get them things they want. Examples are toys or movies, or pocket spending money on a specific occasion, like going with their friends to the water park.

• Kids 13 and up should work for you for money you provide to them. And keep the amounts low. You usually are better off continuing to pay for their clothes, etc. If you give them an allowance, they may buy a $100 T-shirt. If you go clothes shopping with them, those are a lot less likely to come home. Once they earn the money, make sure you have them open a bank account and use it. Teach them to use an ATM, write a check, look at their bank statements. Eventually, when they have jobs outside your home, they can start to make (and manage) their own budgets.

• “Free money” kids receive as gifts should not rest in the hands of the kid. You might buy them Amazon gift cards they can spend, for example. Most kids will waste this money -- so agree with them when they receive it how much is “mad money” (spendable), how much should be saved, and how much should go to a charity or charitable purpose. Even 5-year-olds can grasp these 3 types of spending.

Wayne Kelly Chair & Professor of Finance, Real Estate and Business Law at the University of Southern Mississippi What tips do you have for consumers looking to make a budget and stick to it? Tips for consumers on sticking to a budget -- I have one. Make a savings commitment one of the high-priority items. In other words, pay yourself first (or nearly first). When you make that commitment, it’s harder to stiff yourself than a lower priority. That will let the consumer amass a war chest, so to speak, for retirement, large ticket items, etc. for the future. If you only save leftover money, there will never be leftover money. What is the biggest obstacle for consumers trying to stay on budget? Biggest obstacles to consumers -- from my observation, it’s little temptations. A few dollars here, a few dollars there adds up, but that’s not on the mind when nickel-and-dime spending minute to minute has cash trickling away on trinkets, eating out, etc. As a footnote, it would be a great budgetary exercise to record all the nickel-and-dime discretionary spending, and see how the dollars matched the priorities at the end of a week or month. What tips do you have for consumers to get out of debt and stay debt free? It isn’t clear to me that being debt free should be everyone’s goal all the time. It is one of mine in principle, but leverage can be a good thing, too, depending on how it’s used. A super popular financial advice guru preaches hard against debt, particularly credit card debt. I think more individuals should heed the principle to guide the practice, but not treat it like it’s a law. The best tactic I can think of when it comes to handling the debt that seems to be most problematic is to not carry a credit card balance. If you have a card and can’t make that a habit, then you should hide the card from yourself, except for emergencies. If you close the account, part of your credit history goes away, and that can cost points on your credit score. How should parents teach children about the importance of financial responsibility? School-age kids are smart enough to be involved in spending decisions that affect them, and can figure out quickly that Mom’s money is more easily spent than Kid’s money. Involve them in spending that they understand, and advance their involvement with age and the complexities that brings in their consumption. Methodology Spending & Debt – Total Points: 40

 

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