Alaska just received a report card and the grade wasn’t good. In fact, the grade should be cause for alarm, because it shows that we should take our finances more seriously.
Though we have a higher-than-average income, our financial lives are in a shambles. A recent study by Wallet Hub reported that Alaskans come in 50th in financial literacy compared to other states. We are tied at 44th with Connecticut, Rhode Island, and Vermont when it comes to having the least sustainable spending habits.
The average Alaska household earns $71,583 per year compared to the rest of the United States at $53,657. This income difference might have something to do with our cavalier attitude when it comes to money. There is always another dollar to be made, so we don’t worry too much about conserving what is in our hands. However, with the current fiscal condition in our state, many of us may be facing a rough financial time.
It is clear that Alaskans need to consider their financial habits and the unknowns. Many of us, particularly those with state jobs and those who are employed to support state activities, could be facing a difficult fiscal future. Before we go down this bumpy road, what can you do to get your financial house in order?
Take a good look at your income and future prospects for income. Though we have always been able to lay our hands on an extra job or more money, that may be impossible in the future. And the tenuous state budget has let us know that the annual influx of cash from the Permanent Fund may not always be there to save us. I worked with a client once who charged whatever she wanted on her credit card, paid what she could each month and then used the PFD to pay off the remainder each year. It was a good plan for her, but I’m not sure you should have that kind of a financial plan now.
Learn where your money is going. By writing out and categorizing your expenses, you know what you are doing currently. Take a hard look at the list of what you are spending. Does this list match with what you thought you were spending on? Sometimes those surprises are what makes us change our spending habits. Did you realize that your eating out budget exceeds the cost of food at home? If that is what you value, then keep on, but explore the reasons. Maybe you lack kitchen skills or perhaps you are spending valuable time with someone rather than slaving over the stove. That is fine, these are spending decisions that you need to make personally. However, look at those things that you don’t value. Make a list of changes that you could make if needed. Having a plan on how you could cut expenses before it is necessary is important to your financial well-being and decreases possible stress levels.
Then turn to the income side and make a second list. If you needed to, what is possible if you needed more income? A second job? Maybe a change of employers? Everyone needs a plan on what they might do if the situation warranted. Again, time spent thinking now may allow you to lay foundations necessary if your situation changed.
A well laid out financial plan is essential as we face these challenging times. I hope you never have to use it.
Roxie Rodgers Dinstel is associate director of Cooperative Extension Service, a part of the University of Alaska Fairbanks, working in cooperation with the U.S. Department of Agriculture. Questions or column requests can be e-mailed to her at firstname.lastname@example.org or by calling 907-474-7201.