Every day is an opportunity to reflect upon your spending, review your finances and gradually improve them. Whether you’re just starting to earn or you’ve earned for a long time, improving your financial literacy can help you start and maintain smart money management habits.
We offer resources across 5 financial literacy principles to support you. Click on any of the content links to learn more.
Your income can determine your lifestyle, and being more aware of how you use your income can make a difference in how and when you achieve your financial goals. Take the time to understand your pay and make the most out of the workplace benefits available to you. A retirement plan could be one of the most valuable benefits to do just that. Consider the following:
- Used effectively, a retirement plan can deliver a long-term impact on your financial well-being
- Taking advantage of any contribution match offered by your employer can help ensure you’re not leaving any free money on the table
- Contributing to your retirement plan lets your hard-earned income work for you both now and in the future
Combining your retirement assets can make things easier. If you have outside retirement accounts, consider a rollover to your employer’s retirement plan. This can help you:
- Manage your assets toward a single strategy
- Meet your goals by avoiding being over- or underinvested in certain asset classes
Budgeting is an important step in managing your money and ultimately having more of it to invest in your long-term goals. Once you put together a budget and develop the habit of sticking to it, you’ll see that it’s worth the effort as your debts decrease and your assets accumulate.
Having a budget is one of the best ways to track your finances. It allows you to:
- See where your money goes each month so you can prioritize how to spend and invest it
- Find optional expenses you can reduce to make more room for savings
- Create categories to set money aside for major goals and purchases, such as retirement, a college fund or vacations
Take steps to safeguard yourself against unplanned expenses or financial emergencies by creating an emergency fund. An emergency fund is not designed for nonessential spending. Instead keep a 3 to 6 month cash reserve in case a situation happens where you truly need additional funds.
When you’re living within your means, you’re earning more money than you’re spending, which allows you to save more for your financial goals and provides a cushion in case of emergency. Understanding your cash flow is an important part of living within your means.
Before you set a financial goal, you should know how much money you make after taxes and understand your expenses. This helps you set a reasonable budget so you don’t spend more money than you make and adjust as needed.
You might need to borrow money to bridge the gap between paychecks, cover an unexpected expense or finance larger purchases. Whether money is borrowed through a loan, credit card or friends and family, it’s essential to ensure you can afford the monthly payment.
Following responsible practices can help you to avoid pitfalls. Responsible debt practices include:
- Paying your bills on time or early to avoid hurting your credit score
- Borrowing below your means and within your budget
- Taking the time to find the lowest rates and fees
- Improving your credit score