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:
Budgeting
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
Credit Cards
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?
Obtain financing
- 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
Good advice KC! I love the savings and investing breakdown! Power of compounding!
Small changes can do big things! For the price of lunch everyday, if you invest it you will have a lot of money for retirement.
Nice rundown KC. I think buying a home is a very important skill. Renting is probably cheaper, but it’s so much nicer to live in your own home.
Owning s home is one of the American dreams, but it is also an asset that is subsidized by the federal government through the interest deduction.
I now see the value in a budget! As a college student, I think I took the starving student role a bit too far by being to frugal! I still had a great time, but it could have even been better! A good personal budget could remedy the need to live so frugally while in college…
Budgets control spending and hep you reach your goals! Similar to dieting, if you are denying everything, you will break the diet! If the budget is too restrictive, you cannot follow it.
I’m always shocked how cheap my mortgage is after 5 years. Love inflation!
It is the benefit of a fixed rate mortgage and inflation.
We are currently learning to be more financially responsible and I found your article helpful and gave me quite a few things to think about and consider as we are attempting to set a budget and make some financial goals for our family.
Start small by spending less than you earn. Establish your goals and develop a budget to help you achieve your goals. Good luck.
I do think our country’s predicament is in large part due to the lack of financial literacy. When we can’t even balance our own checkbooks and manage our debt, how can we reasonably be outraged with our politicians? All we can do is continue to educate. Nice work.
Thanks, I think financial literacy should be a graduation requirement for all high school students.
Thanks, I think financial literacy should be a graduation requirement for all high school students.
I do think our country’s predicament is in large part due to the lack of financial literacy. When we can’t even balance our own checkbooks and manage our debt, how can we reasonably be outraged with our politicians? All we can do is continue to educate. Nice work.
Another thing we can add to the discussion is to keep track of a spending journal for 30 days. This means keeping a track of all the little expenses like a .25 pack of gum. You’ll start to notice where you money is going and think of creative ways to reduce some of your expenses.
Good point! I don’t think gum is 25 cents any more though.
I advise you to find some less boring ways to budget your finance like “Pay Yourself First”. Spread sheets, Quicken, or something else. Because there are long term advantages of budgeting and it’s much easier to budget if you visualize the long-term benefits of this work. There are long term benefits of Budgeting. So You have to find alternate ways to budget your finances if you find it boring.
Budgeting is a little like diets, there are a lot of choices. The key objective is spending less than you earn! I usually start with my goal in mind and alter my expenses to meet my goal or objective.
Great tips to manage your finances and stay out of debt. Quite timely too, with this being financial literacy month and all.
Thanks, this is one of my passions to spread the word on financial literacy.
Hi krantcents,
This is another great work. And this is what I needed especially that I can’t stop myself from spending my money. And I realized that it would be my loss if I will continue it. So thank you for the tips.
Thank you for stopping by, I hope you will read other articles you find interesting.