In February 2020, the Federal Reserve found that Americans have reached a record high for the amount of credit card debt owed. On top of that, charge-offs and past-due payments among 18-29 year-olds is rapidly rising.
To top it off, we’ve entered the worst economic recession in modern times. The pandemic shuttered many businesses, and two-thirds of Americans are working from home while many don’t have the option. Everyone is feeling the financial squeeze, especially Millennials who entered the workforce in the previous recession and have never fully recovered financially.
With more than 3 in 4 Americans having at least one financial regret, fiscal illiteracy is seemingly normal in the United States. Perhaps it’s a matter of mindset – which is built on whether you see your own character, intelligence, and abilities as fixed or capable of growth. However, it’s never too late to learn.
A fixed mindset is simply a stuck mindset. Your viewpoint on life will translate into how you navigate through it. Having a fixed mindset may limit your growth. For instance, someone with a fixed mindset may feel threatened by the success of others, or may even ignore constructive criticism. It’s also common for those with fixed mindsets to avoid challenges and failure, making them likelier to give up on tasks and situations with ease.
Why? Because those with fixed, or stuck, mindsets desire to look smart or skilled compared to others.
On the other hand, those with growth mindsets look toward the future. Optimistic individuals thrive on new learning experiences, making them eager to learn and find inspiration in others’ success. In other words, individuals with a motive to grow will accept and learn from constructive criticism, and embrace their challenges in life.
Why? Because those with growth mindsets see setbacks as opportunities. They have the desire to learn and improve themselves.
Even during an economic downturn, we can work to better ourselves so we come out the other side better and stronger. If you are out of work right now, there is no better time to start learning how to prepare yourself financially for the next economic downturn.
Knowing this, it’s important to grow your financial literacy. Simply talking about finances can help you learn. Currently, 53% of Americans feel anxious when thinking about money – and for younger adults aged 18-34, it’s 63%. On top of that, more than half of Americans regret not saving more, and of those, most regret underfunding their retirement accounts, emergency funds, and education for their children.
Still, less than 1 in 3 Americans are able to identify at least 3 basic financial concepts by the age of 40. Only 60% understand borrowing and only 35% understand risk, but 73% feel confident about their ability to achieve their financial goals. How are people doing so?
Technology lends a great deal of help. 39% use websites or apps to help with financial tasks. For example, apps like Cleo track your spending habits, quizzes, financial knowledge, and roasts users for overspending. Similarly, apps like Earnin drive users to celebrate their success by depositing into a virtual “tip jar” to save money.
However, there’s no trick like simply knowing your debt, weighing your options for repayment and consolidation, and taking action. If you’re unsure where to start, simply check your credit report to obtain a list of your current debts.
Following this, there are multiple routes you can take in tackling your owed payments. Regardless, just be sure to pay at least the minimum on all loans open.
In 2020, Americans owed $14.15 trillion in total household debt, $1.64 trillion in student loans, and $1 trillion in credit card debt. Although financial mistakes seem to come with the package of being an American, it’s never too late to change.
The recession will be over before you know it, and it’s up to you to choose whether you come out better on the other side. Find more information on growth mindsets for financial literacy below.