March 21, 2016
Information Courtesy of USAA
Financial literacy, financial capability, financial understanding.
Whatever the name, the core idea is the same: being equipped with the knowledge, skills and tools to manage your money and secure your future.
That’s no easy task, but here are five key money topics you’ll need to understand and put into action to make financial literacy a reality:
Financial security starts with prudently managing your money on a day-to-day basis. That means spending less than you earn and saving consistently. Try to save at least 15% of your gross pay for short-term goals, long-term goals and unexpected expenses. Do it first and not with what’s left of your paycheck. Track all your expenses and set reasonable spending guidelines. Finally, don’t get caught up in how others are spending and undermine your own budget.
With so many different types of insurance – auto, renters, homeowners, life, disability, health and long-term care – and so many variations of each, insurance can appear daunting. But financial pitfalls abound if you’re not adequately covered. Insurance is at the foundation of any good financial plan. Learn the basics and get the coverage you need to protect your financial well-being.
Stuff happens. And one of the best ways to keep that stuff from throwing you off course or burying you in debt is to set aside money in a separate savings account for emergencies.
Debt and credit
Debt can be a useful tool, but it can also be a dangerous trap that undermines your financial health. Minimize your use of debt and understand the world of credit and credit scoring.
Stock, bonds, mutual funds, CDs, annuities – the universe of potential investments is massive. Not to mention the dizzying array of account types: taxable, IRAs, Roth IRAs and company retirement plans like 401(k)s. But, confusing as this may appear, investing is not rocket science. And remember, it’s never too early to start investing.
This isn’t a comprehensive list, but if your goal is financial literacy, it pays to gain a basic grasp of these five elements. If you’re not there yet, keep working toward the goal. If you have gaps, find a person or organization you trust to help close them.
Most importantly, turn your knowledge into action.
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