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Developed by Wilma Schuh and Brenda Procter, Consumer and Family
Economics Specialists, University of Missouri Extension |
Relationship to Building
Strong Families
Not having enough money at the end
of the month can create stresses for even the strongest family. When
families experience conflict about money, it is really about something
else. Money is just a medium of exchanging goods and services with each
other.
Money conflicts are actually about
who gets to have and do what. For that reason, this module focuses
considerable attention on money values and family communication about
money.
Money matters are important across all
levels of income.
Brief program description
Activities are provided to help
participants identify their own money styles and how they developed them,
practice allocating resources within a simulated family unit, learn to
negotiate with others about spending decisions, and get simple tools to
help their families plan to have what they want and need.
Research findings (Click here for pdf of research findings)
Many national studies show that financial management
difficulties can affect families of all types and at all levels of
income. In fact, consumers spend almost 19 percent of their disposable
income on debt payments (e.g., housing and consumer debt, automobile
leases, homeowners’ insurance, property taxes). Furthermore, families
who rent spend more of their disposable income on debt than do families
who own their own homes (26 percent compared to 18 percent).
In 2008, the average American with a credit file held $16,635 in debt
(excluding mortgage debt). About half of U.S. households have credit
cards with balances and average household credit card debt was $10,679
at the end of 2008. Although lower-income families are no more likely
than higher-income families to be in debt;
- The number of low-income families experiencing debt hardship (total
family debt greater than 40 percent of total family income) has roughly
doubled during the last 20 years and;
- Low-income families have experienced little increase in their income,
yet have accumulated debt faster than any other income group.
Although the global financial crisis has decreased credit
opportunities for families (which has slowed still-rising consumer debt
rates), it has also resulted in families having lower household
wealth/net worth. Declines in household wealth, along with rising
interest rates and employment instability, have caused more families to
face debt hardship.
This high level of debt threatens households’ well-being and creates
a tremendous amount of stress for families. Consumers either paying late
on their loans or not paying their loans (i.e., loans at least 30 days
past due) has increased during the last few years, with delinquency
rates currently about 5 percent for credit card loans and 3 percent for
other consumer loans. Bankruptcies have also risen during the last
couple of years, with more than 1 million families and individuals
filing for relief of their debts in 2008. Bankruptcy is not limited to
any one socioeconomic group and, in fact, is more extensive among
upper-income families.
2008 Missouri statistics
- The number of households that filed for bankruptcy is 24,720, which is
an 18.4 percent increase from 2007.
- One household went bankrupt every 21 minutes.
Bankruptcy alternatives
There are several possible alternatives to bankruptcy for those in
financial trouble. Many companies offer these services and will
negotiate with creditors on a client’s behalf or provide lending
services. It is important that the household considers a reputable
professional to handle the situation and makes sure nothing is done to
make the situation worse. Not all alternatives are the same and some may
still have a negative affect on one’s credit rating, so it is important
to investigate all options wisely.
- Debt counseling service
A first step could be to contact a reputable counseling service to
discuss your options. These organizations typically provide financial
education, help with repayment plans and budgets, or provide assistance
with some of the options below. Good places to start include:
- The National Foundation for Credit Counseling provides services,
counseling, lists of approved counselors nationwide and guidelines for
selecting legitimate counseling services. Go online to
http://www.nfcc.org
or call 1-800-388-2227.
- The Department of Justice’s Web site lists approved debtor education
agencies. Go online to
http://www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm.
- Debt management plan
Generally an option for those with more severe debt, these plans
(facilitated through not-for-profit credit counselors) consolidate
monthly payments and obtain payment or interest reductions on unsecured
debts.
- Debt consolidation loans
These typically involve borrowing against home equity in order to pay
down credit card debt. Although borrowers may be able to pay off higher
interest rate loans with one low interest rate loan, a borrower could
lose his or her home if unable to pay the loan. Given that home prices
in many areas have decreased significantly due to the economic crisis,
at this time debt consolidation loans may not be the best option, as
they may be neither affordable nor something families may qualify for
until the economy bounces back.
Goals and objectives
- To identify personal money styles and
how they developed;
- To practice allocating resources within
a simulated family unit;
- To learn to negotiate with others about
spending decisions;
- To understand the need for a spending
plan.
Target audience
Working families with children
Completed by Starla L.
Ivey, Ph.D., 2/20/2005
Revised by Graham McCaulley, M.A., 6/23/2009
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