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(From Portland Press Herald) – People who live here are more in debt than those in 46 other U.S. states.
As we prepare to celebrate freedom this July 4, it is important to remember: There are many facets of freedom in America. It is not just a matter of free speech or freedom of religion, although both are important.
One critical facet, especially in today’s inflationary economy, is financial freedom. This involves taking control of your finances and the choices you make from a monetary perspective. It means having enough income, savings and investments to live a healthy, rewarding life without scrambling to find money, stretching your cash thin, or living paycheck to paycheck for an extended period of time.
Unfortunately, financial freedom is not a reality for most Americans. Over 60% of Americans live paycheck to paycheck. (In some expensive markets, even Americans earning over $100,000 a year can live like that.) Nearly half of all Americans can’t pay an unexpected $1,000 expense with cash on hand. Many Mainers lack the financial wherewithal to handle an emergency, such as an unforeseen car repair or a sudden illness.
And inflation only makes the situation worse. While inflation has cooled in recent months, the cost of daily necessities generally exceeds pre-COVID figures. Whether it’s gas or a weekly grocery run, Mainers are certainly not immune to feeling stretched financially.
These days, debt is extremely common. According to one recent analysis, Mainers are actually more in debt than the residents of 46 other U.S. states. Consider the four in 10 Mainers who currently carry medical debt or those with credit card debt – Maine has the 11th-highest credit debt level in the country.
None of this screams “financial freedom.” People in Maine and beyond often find themselves anxious and stressed about their finances, struggling to find breathing room.
There are solutions to the problem, although it can be difficult getting to them. Of course, there are best practices like budgeting. Refusing to overspend is a healthy habit. Paying off credit card bills in full and monitoring your credit score are worthwhile pursuits. The same goes for setting up an automatic savings account that can give you an emergency fund in times of need or contributing to an employer’s retirement plan. But all of this is easier said than done.
Certain solutions fly under the radar. For example, a debt consolidation loan can help people who don’t have the cash on hand to pay down high-interest debt. Credit unions also offer Visa credit cards and other products with a lower annual percentage rate of interest than traditional banks. Local institutions like credit unions, which are member-based and extremely active in their communities, can represent pathways to paying off debt even when it appears to be impossible. Whereas larger corporations often come across as impersonal, organizations that rely on people helping people are very invested in helping Mainers save money over time.
Acting now can prevent many, many headaches in the future. Let’s say you are carrying a balance on a credit card with an 18% interest rate. Unless you allocate the unexpected funds into a savings or investment account that outpaces the 18% interest rate, you will be losing money in the long run.
If you have a little extra money lying around, paying down debt now will also boost your credit score. If you can’t find the money, that’s where financial advice comes into play. In Maine, there are plenty of experts who are ready to assist, person to person. Don’t be afraid or embarrassed to seek out help.
Together, we can move one step closer to financial freedom, one of the most important forms of freedom in America.
About the Author
James Lemieux is the President of Sebasticook Valley FCU.