5 fundamentals you need to know for a better financial future

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April is national Financial Literacy Month

 

How knowledgeable are you about your personal finances? Do you know how much money you need to cover your monthly living expenses? How much interest are you paying on your credit cards, auto and home loans? How much money will you need to retire?

 

April is national Financial Literacy Month, a resolution designation by the U.S. Senate in 2004 “to raise public awareness about the importance of financial education and the serious consequences that may be associated with a lack of understanding about personal finances.”

More than a decade later, the concerns are still very real, according to a Harris Poll survey  conducted for CareerBuilder:

  • More than three-quarters of workers (78 percent) are living paycheck-to-paycheck to make ends meet, including nearly one in 10 workers making $100,000 or more.
  • 71 percent of all workers say they’re in debt and more than half of those feel they will be for the rest of their lives.
  • Nearly 40 percent of workers do not participate in a 401k, IRA or comparable retirement plan.
  • Less than a third of workers (32 percent) stick to a clearly defined budget.

Financial Literacy Month is a good reminder that there’s no time like the present to take control of your financial life, says Mark Avallone, author of Countdown To Financial Freedom. He recommends working purposefully each day towards educating yourself on how to gain your financial freedom.

“Start in small ways by reading some articles, using a mobile budgeting app, or signing up for a personal finance class at a community college. Then decide to live on less than you earn each month and automatically save the difference. While you may be able to save only a little, it is ok to start small and grow into a larger savings plan over time. The key is to start now.”

 

Here are five basic concepts everyone should know to start managing their money wisely:

1. Budgeting: “Doing a budget is simply telling your money where to go,” explains one of our favorite sources for financial advice Dave Ramsey. Here are his four easy steps to learn How to Make a Monthly Budget That Works.

2. Debt management. Paying down debt is an essential part of creating a bright financial future, but without a plan, it can be hard. Here are some tips you may not have thought about before to get started on creating your own debt payoff plan.

3. Credit scores. Lenders – such as banks and credit card companies – use credit scores to evaluate how likely borrowers are to repay a loan on time and to determine who qualifies for a loan, at what interest rate, and what credit limits. A poor credit score (649 or below) can prevent you from getting a credit card or renting an apartment, while a good credit score (700 or above) can mean lower interest rates and more favorable terms on a car loan or home mortgage. To learn more about understanding your credit score – including how to improve it – visit the consumer credit score website Vantage.com.

4. Equity. This finance term can be confusing and maybe even a little intimidating for many people. Basically, it’s anything you have of value (such as your home or car) that you could sell for more than what you owe on it. For many Americans, equity — even more so than cash in the bank — is the path to financial security. For two ways you can begin to build equity starting today, check out What Is Equity and Why Do I Need It?

5. Retirement planning. Have you heard the one about a man who asked his financial planner how much money he needed to retire, and the planner replied, “It depends. How long do you plan to live?” The moral of the story is that it’s never too early to start saving for your retirement. Many financial planners recommend saving 10-15 percent of your income per year, starting in your 20s. A good place to begin your financial education on this topic is CNN Money’s Ultimate guide to retirement.

For more money saving tips – such as treating your finances like flossing and finding the credit card that’s right for you – check out our blog article Three Smart Money Tips for Financial Literacy Month.

 

Since 2003, AutoPayPlus has been helping consumers pay off their debts faster and save money on interest plus automate bill payments, organize finances, monitor credit, and create a budget and savings plan for the future. We’d love to help you, too. Contact us today.