How to keep on top of your personal finances in a growing economy

The economy has shifted into high gear, with corporate profits surging, bankruptcies and foreclosures tumbling and the national unemployment rate easing to 3.8%, an 18-year low.

Americans have become more optimistic, but their personal finances don’t necessarily mirror the economy’s progress. The latest assessment of household financial health by the Federal Reserve shows “many signs of growth and improvement, along with remaining pockets of distress and fragility,” according to its May report.

Has your own financial status climbed to near an all-time high? If not, here are some actions worth heeding:

Find a better, steadier job

With unemployment so low, now might be the time to find a new job if you can, while the getting’s good. That low 3.8% rate masks a darker secret — a lot of jobs pay poorly or feature irregular work hours or other undesirable qualities. Three in 10 adults have unsteady income, according to the Fed survey, which included responses from more than 12,000 Americans.

About 10% of adults — including one in four adults under age 30 — rely on financial support from people outside their households. Middle-aged parents often are the ones providing such assistance.

Many Americans also supplement their incomes with part-time jobs, from cleaning houses to driving for ride-sharing companies such as Uber.

Incidentally, while roughly half of workers said they received a pay raise last year, only 18% said they asked for one. With available workers in relatively short supply, now’s the time to make such requests.

Build up a cash cushion

The root of many financial problems is the lack of cash in reserve. People who can’t meet emergency or unexpected expenses often respond by running up credit-card balances, taking out other costly loans or draining retirement accounts. Only 45% of respondents in the survey said they didn’t carry any credit-card balances from month to month last year.

People tend to draw down their cash reserves during recessions, while economic expansions are normally good times to build them up. Yet four in 10 adults, according to the Fed survey, said they would have trouble meeting an unexpected expense of just $400 — even at a favorable point in the economic cycle. One in five adults said they couldn’t pay all their monthly bills in full last year, and one in four said they skipped needed medical care last year because of an inability to pay for it.

Americans have reported improvement in saving money and paying bills, as 50% of respondents in a 2013 survey indicated they would have trouble meeting a $400 payment. Still, the percentage who would struggle to come up with $400 is alarming given that financial advisers recommend that people try to accumulate enough cash to handle at least three months of living expenses. American households spend about $45,000 a year on average, according to the Bureau of Economic Analysis. That suggests people should have at least $11,000 or so in savings, not $400.

Get your banking in order

The latest Fed survey suggests more Americans are tying into the banking system. That’s good because bank and credit union customers tend to be more financially fit, partly because they get better deals on financial services.

Some 95% of respondents in the survey said they have bank or credit union accounts. However, some of these people are “underbanked,” meaning they have traditional accounts but also utilize costly alternatives such as check-cashing or advance-payment services or pawn shop or auto title loans.

Combined, the proportion of unbanked or underbanked respondents has eased to 23%, down from 29% in a 2015 Fed survey.

At any rate, now’s a good time to sign up for free checking accounts and shop for credit cards that offer lower interest rates, don’t charge annual fees and have attractive reward programs. With credit plentiful now, this also could be the time to refinance a mortgage, though interest rates aren’t as low as they had been a couple years ago.

It’s also smart to sign up for banking services that can help you save more or cut down on fees. In the latest Fed survey, 62% of respondents said they pay at least some bills automatically (reducing postage costs and possibly avoiding lost or stolen checks), and 52% have signed up for alerts to notify them of financial situations such as low balances or suspicious payments. Also, 46% said they save automatically by having money transferred from paychecks or checking accounts into investments.

Improve your retirement preparations

The survey didn’t divulge many new revelations when it comes to retirement planning. A lot of Americans still haven’t made adequate preparations, including the one-quarter of working-age adults who say they don’t have any retirement savings or pensions. To improve on that, get started with a savings plan, increase your contributions, utilize tax-sheltered accounts, make the most of employer matching funds and educate yourself about how various investments work.

One worrisome finding from the report is that many people continue to retire at early ages. Of respondents who were retired last year, half said they quit working before 62. Another quarter retired between 62 and 64.

Many retirees said they stopped working for health reasons or because of an inability to find jobs. Nevertheless, delaying retirement by even a couple years, if possible, can make a huge difference in bolstering financial readiness. When people delay, they can hold off withdrawing money from investment accounts, giving those balances more time to grow. They also can push back the start date for taking Social Security benefits. That’s important because monthly benefits rise each year a person delays, up to age 70.

It also helps to reduce “leakage” in your retirement funds while you’re still working. According to the Fed survey, 5% of working-age respondents borrowed money from their accounts last year, 4% permanently withdrew funds, and 1% did both. People who tap their accounts early damage their finances and are less likely to view their retirement planning as on track.

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