What is Financial Literacy?
Many fiscal topics fall under personal financial literacy, from budgeting your grocery spending to investing into a 401(k) to saving for a down payment on a first home. It pays to be financially literate about how your money works and can work better.
These topics below cover a few financial literacy basics that can help you get on a path to financial wellness.
1. BudgetingIt makes sense to begin with where your money is going on a daily, weekly and monthly basis. Before you being learning about larger financial topics, focus on your wallet.
If you search “budgeting” online, the number of articles and opinions may feel overwhelming. Since there are so many options, however, you can find a system that works for you.
You may decide to categorize your spending and set firm limits on things like entertainment and eating out. Others find it helpful to budget with a specific goal, like a down payment or new car, in mind to help them avoid unnecessary purchases.
Budgeting together as a family allows you to spot trends and determine where you are spending too much or, in the case of insurance perhaps, too little. Once you have an accurate picture of your income and spending, you can determine where to make cuts and begin to save.
2. Balancing your checkbookReconciling your accounts is another element of financial literacy that you can tailor to how you work best.
Do you prefer a pen and paper tracking system for balancing a checkbook? Or do you like to see your money coming and going in a mobile banking app so things are at your fingertips? Either method works if you are diligent about balancing your checkbook on a regular basis.
Keeping an eye on money coming out of your accounts also allows you to spot fraudulent transactions quickly. Added bonus: it will help you avoid non-sufficient fund or overdraft fees.
3. Credit ScoresSo what is a credit score and how does it help you? What do the numbers mean?
These are some questions you have probably asked when you’ve gone to make a large purchase, like a new vehicle or home, and need to get approved for a loan and obtain a favorable interest rate.
A credit score comes from factors including payment history, amount of debt owed, when your credit history started, new credit and types of credit in use. A good credit score, somewhere between 650 and 800, is where most consumers fall. You can reach the excellent range of above 800 if you continuously work toward that goal.
Paying bills on time, paying off significant debt, avoiding using multiple credit cards, and opening manageable forms of credit are just a few of our tips for helping to build your credit. When opening a new line of credit, like a store card, just make sure you can pay the bill on time.
If you are working to pay off debt and want to close credit cards, credit experts advise that you don’t close multiple accounts within a short period of time, as this could actually hurt your credit score.
Just like your budget, check on your credit often through a reputable credit score service.
Learn more about maintaining a high credit score here.
4. Protecting your identityAfter starting to budget and learning more about how to boost your credit score, what are ways to protect the money you’re building?
Like keeping a close eye on your credit score, a major part of fraud protection is monitoring your account. By logging into your online or mobile banking on a daily or weekly basis, you will notice fraudulent transactions quickly and be able to report them to your bank.
Creating strong passwords for accounts is another element of fraud protection. It’s best to use a password with a variety of letters, numbers and characters; if you’re worried about remembering a complex password, try using a phrase and substituting a letter for a character, such as “a” for “@.”
Using available digital resources can make fraud protection easier. Set up purchase alerts with your bank to notify you immediately of any suspicious activity. You can customize the alerts you want to receive by purchase amount and method of delivery like text message, email or phone call. If you have an alert set up for any purchase over $100, you’ll receive a message notifying you if someone tries to use your card without your knowledge.
Learn more about protecting your card activities here.
5. Begin Investing in the Future
Investing is within reach even if you’re only beginning your journey to financial wellness.
By partnering with a financial advisor, you can create a savings plan that takes into account your current financial state and can grow with you. Putting aside money now will set you and your family up well for the future.
Healthcare, upkeep of your home, retirement plans and long-term care are all things you will want to begin saving for even if you can only contribute a small amount.
Sit down with an advisor today to discuss your goals, priorities, and long-term plans. Together, you can develop a comprehensive financial and investment strategy that’s built around your family’s needs.