As part of National Financial Literacy Month, learn how to establish and maintain healthy financial habits. The following are the most important skills that everyone should learn:
A personal budget is a financial plan that allocates personal income towards expenses, savings and debt repayment. It is a structure to reach your financial goals. Goals can be reducing debt, saving for retirement or saving for a vacation.
- Assess your personal and financial situation (needs, values, life situation).
- Set personal and financial goals.
- Create a budget for fixed and variable expenses based on projected income.
- Monitor current spending (saving, investing) patterns.
- Compare your budget to what you have actually spent.
- Review financial progress and revise budgeted amounts
Making financial decisions
Decision-making skills are something we use every day. It ranges from what I should wear to much more complex decisions concerning buying a car or home. What factors should you consider when making a financial decision? Here are five (5) factors.
- Identify the problem
- Gather information and list possible alternatives
- Consider consequences of each alternative
- Select the best course of action
- Evaluate the results
Saving and Investing
Saving and investing are cornerstones of financial management. You should establish and maintain a budget with clear and specific financial goals and understand all of their investment options. If you invest as little as the cost of lunch once a week, you can see what kind of results achieved in ten (10) years.
Save this each week … at % interest … in 10 years you’ll have:
$7.00 5% $4,720
14.00 5% $9,440
21.00 5% $14,160
28.00 5% $18,880
35.00 5% $23,600
Before you start to use credit cards you should understand the advantages and disadvantages of credit cards. Here are some of factors which can different with each credit card.
- Annual Percentage Rate (APR)
- Grace period
- Annual fees
- Transaction fees
- Computation method for the finance charge
Buying a Home
Buying a Home requires some thoughtful planning and know-how. Home buying includes a mortgage and financing..
Determine home-ownership needs
- What type of housing should I buy?
- How much can I afford to spend?
Locate and evaluate a home
- Where do I want to live?
- What aspects of the home need improvement?
Price the property
- What is an appropriate market price?
- How much negotiation movement exists?
- How much down payment is available?
- What are current mortgage rates?
- Can I qualify for a mortgage?
- What type of mortgage should I get?
Awareness of your current financial status is the starting point of a personal financial plan. Short term, intermediate and long term goals are based on your current financial position. Decide what actions need to be taken regarding spending, saving, using credit, buying insurance, making investments, and planning for retirement. Budgeting, making financial decisions, saving and investing, credit cards and buying a home are important factors in everyone’s life. What skills do you need to learn? What skills do you need to improve? What are you doing about it?
Photo by: Melody Campbell