It's Financial Literacy Month: Brush Up on Your Financial Skills
Terry Herr, CFP®, CLU
April is Financial Literacy Month. Financial Literacy Month is a national campaign designed to bring more financial education to children and adults. Whether you're a financial wiz or just learning the ropes, so many ways exist to improve your financial literacy. Here are four to get you started.
Make a Monthly Budget
One of the most important steps in ensuring financial success is creating a monthly budget. This may sound simple, but a budget is your financial strategy's foundation. Creating a monthly budget doesn't have to be complicated. In fact it is a lot easier than most think. Here's how to ensure you're setting yourself up for financial success:
- First, calculate your gross monthly income. This could include your salary, investment income, Social Security, child support/alimony, freelance work, or other income sources. Remember to calculate your net income as well, which is how much is left after taxes and other deductions. If you are an employee, this is the take home pay the reaches your bank account.
- Next, consider your financial priorities and allocate your budget accordingly. What are your most important expenses? What are expenses that you enjoy, but could reduce or eliminate if needed. In addition to your regular monthly expenses, you might decide to prioritize your general savings or earmark money toward a large purchase such as a home or car. The important point is to decide what's important to you and to make sure your budget reflects those values.
- Finally, create expense categories for where your money is spent and track each and every expense. It's important to differentiate between wants and needs. You need to pay the rent or mortgage payment, but you want a new pair of shoes or a nice dinner out. By tracking your spending, you can determine whether your budget is aligned with your priorities or if you should make adjustments to meet your goals.
Check Your Credit Score
If it's been a while since you checked your credit score, now is a great time to see where you stand. Your credit score is an important metric when considering your financial health and will play a larger role when you apply for loans, especially mortgages and car loans. If you have a higher credit score, you may qualify for lower-interest debt, which will save you money.
You can check your credit for free or you can request a free annual credit report from the Federal Trade Commission. Checking your credit score does not impact the score.
Reviewing your credit report is important to ensure there aren't any mistakes or incorrect accounts assigned to you. If you notice something on your credit report that doesn't look accurate, such as a loan or credit card you don't remember opening, contact your financial institutions immediately. You can also file a dispute with the credit reporting agencies to report any false information you find.
Understand Your Investment Options
As you become more financially literate and feel comfortable talking about finances, you may consider looking into investments that are aligned with your goals. There are so many different types of investments and working with us can help you understand your options. You should also educate yourself on some of the most common investment types, including:
Don’t Be Afraid to Ask Questions
Talking about finances can be intimidating, but we all must start somewhere. This Financial Literacy Month, make it a goal to learn one or two new facts about finance. Actually why not make it a goal to ask us at least one finanical question by the end of the month? Frankly our best clients are the clients that ask us questions frequently. We will never leave you feeling naive or silly. There's no such thing as a dumb question when it comes to becoming more financially literate and secure.
Financial literacy doesn't come from making big leaps but rather from taking one step at a time. True wealth comes from a long term, systematic plan that is aligned with your unique values and goals.
This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.