The Unit Trust Corporation (UTC) recently conducted a Financial Wellbeing Survey to determine the attitudes and behaviors that lead to financial safety, security and health of Trinidadians and Tobagonians.
The survey, conducted between July 5-30, 2011 among 1,000 adult citizens, aged 18 and over, both in Trinidad and Tobago, was done in conjunction with KRC Research, based in Washington DC and Caribbean Market Research.
The objectives of the survey were to determine how citizens define financial wellbeing and to identify the indicators used to do so.
Of particular significance, the survey identified that the citizens of T&T are not a homogeneous group when it comes to financial wellbeing. Four distinct groups, defined by their current attitudes and practices toward their financial wellbeing, were identified :
- Financially Savvy who are the most informed when it comes to making financial decisions;
- Financially Striving who acknowledge that they need a better understanding of finance to reach their financial goals in life;
- Financially Struggling tend to view financial wellbeing as having enough to cover basic expenses and
- Financially Slow or disengaged who also view financial wellbeing as having enough to cover basic expenses but who spend more than they earn.
Together, three segments (Financially Savvy, Striving and Struggling) are most engaged in their financial wellbeing and account for a fairly sizeable 56 percent of the population.
In our last article we focused on the Financially Slow (you can click on the UTC Investment Column link on the website homepage to read). Today we will discuss the Financially Struggling. The Financially Struggling makes up 15% of the surveyed population. The persons in this segment are more likely to be women and are most likely to report that they ‘don’t know’ what their monthly income is. Their household fiscal management practices consists mainly of participating in Sou Sou (31%), paying off credit cards (2%), having a salary deductions or standing orders to pay bills (3%), making investments or saving money (7%) and creating a budget (1%).
The Financially Struggling tend to view financial wellbeing as having enough to cover basic expenses. When they do manage to save, it is primarily for an emergency fund. The vast majority of these individuals (85%) never plan to meet with a financial planner. However, this segment is the most trusting of their financial institution, with 91 percent of them reporting that they turn to their banks for financial advice; family and friends rank a distant second at 54 percent.
CREATE A BUDGET
Financial wellbeing is, however not unattainable for the Financially Struggling. For this segment, one important aspect of determining financial health and creating financial stability is creating and following a budget. Why does budgeting matter? This will allow this segment to identify their income and expenditure on a monthly basis. Money is a tool that enables you to reach your goals, but until you know where your money is spent and on what, you can’t use this tool effectively.
Like the Financially Slow or Disengaged, another crucial step for the Financially Struggling to take to improve their financial health is to begin setting financial goals – short , medium, and long term goals. As we discussed in our last column, (you can click on the UTC Investment Column link on the website homepage to read), short-term goals are generally defined as those that may be achieved in two years or less, medium in three to five years and long term goals are over five years. Not only does this help improve your financial outlook but it serves as an important guide that will allow you to identify what investment vehicle is best suited to help you to realize your goals.
DEVELOP A SAVINGS HABIT
Another strategy is to develop a regular, consistent and disciplined saving and investing habit. This could mean the difference between being always in financial distress and having some measure of financial security and wellbeing.
Having payroll deductions made into any of UTC’s funds, namely UTC Universal Retirement Fund or UTC TT $ Income Fund or Growth and Income Fund, can ignite the savings habit and create an investment mindset. In this way, you assure yourself of having secure, stable and diversified investments.
Such actions can go a long way towards putting the Financially Struggling segment on the path to improving their financial health. The rule of thumb is, it is not how much you earn but how much you keep from what you earn and what you do with it.
Do you have any questions or comments about this column? Are there any topics that you would like covered? Please email us at email@example.com