How can you save money when you’re living paycheck-to-paycheck? With so many credit cards to choose from, how do you know which one is best? Will you ever be able to buy a home?
April is Financial Literacy Month; the perfect time to find answers to these personal finance questions and more. The month-long promotion is designed to educate consumers about how to manage money wisely and provide useful lessons about saving, investing and using credit.
The Council for Economic Education is participating with its #MySavingsTip campaign that features personal savings tips from inspiring leaders and entrepreneurs. They include:
1. Treat your finances like flossing; do it every day – Annamaria Lusardi with George Washington University’s School of Business knows first-hand the importance of spending time each week going over your expenses and savings. “If I don’t pay attention, I’m likely to spend more.” She also offers lessons learned from her own mistakes, including taking advantage of opportunities like maximizing a 401(k).
Carrie Schwab-Pomerantz, the daughter of investing legend Charles R. Schwab, agrees. “Make savings a part of your routine – like brushing your teeth.” Her advice: Start early by putting aside a small portion – say 10% – of every dollar you earn.” Most people’s mistakes are about procrastination,” she said. “As a young person, retirement seems so far off.” But when it comes to saving and investing, “time is of the essence.”
2. Find the credit card that’s right for you – New York Times columnist Andrew Ross Sorkin, author of bestseller-turned-movie “Too Big to Fail”, says it’s important to do your research. “It’s not a five minute research project; you might need a few hours online. Your needs are going to be different than other people.”
Choosing the best credit card is an important decision, advises NerdWallet. “The credit card you choose should help you achieve your financial goals in the most affordable, efficient way possible.”
Research your options and ask the right questions to find the card that’s the best fit for your spending habits and credit situation. Do you want to build or rebuild your credit, save on interest, or earn travel or cash back rewards? Other questions to consider include how much it costs to open an account, is there an annual fee, what is the card’s policy on balance transfers, and how quickly will you earn rewards.
3. Use biweekly payments to save money on interest and improve your credit – Biweekly loan payments are a simple way to pay down your debt – such as a car loan, student loan or high credit card balances – without drastically changing your lifestyle. And, when you reduce your total debt, your credit score improves which can translate to a lower interest rate on your next loan.
How does it work? Standard loans require one payment every month. Biweekly loan payments divide this payment in half and pay that amount every two weeks on a schedule that coincides with when you get paid. Because there are 52 weeks in a year, you’re making 26 biweekly payments over the course of a year (the equivalent of 13 monthly payments). On a monthly basis, the payment amount is the same. However, an extra month’s payment a year can reduce interest charges and shorten the term of the loan.