Yes, this is an annual observance that takes place in the United States during April. The goal is to promote financial education and help people of all ages manage their finances. Let’s go through some of the basics.
- Save Money – I have read that only 46% of people have a savings account and 2/3 of Americans could not come up with $1,000 in case of an emergency. The 50/30/20 rule suggests allocating 20% of your take home income to savings, this includes retirement, short term savings and other goals – however any amount is helpful. Just get into a good routine of saving.
- A Budget – Ideally with the 1st paycheck, but definitely the second paycheck – Once you can estimate your monthly income, set up a budget. Identify your monthly expenses including spending money for personal items and activities you enjoy. Be sure to track your expenses for a few months to see how well you are doing and make adjustments if needed.
- Debt Management – If your goal is to get or maintain a good credit score, you should have at least one credit card in your name. Often times depending on your job, people get a second one for work related expenses and one for personal expenses. Be aware of any balances you are carrying on credit cards as they can affect your credit score.
- Investment Accounts – The ideal time to start a investment account is an early as possible. The sooner you start, the more time your money has to grow. If your employer has a pension account, you can take part in that as an option and if not, you can start a Roth or IRA account and contribute to it. Even small amounts can add up over time. Talk to a financial planner or do some homework on your own with the basic investment options, such as, mutual funds and ETF’s. Everyone’s risk tolerance is different, so understand your comfort level with any investment you choose.
- Check Your Credit Score – You should check your credit scare at least once a year. With identity theft on the rise, checking more frequently might be a good idea. Some credit card companies give you your credit score monthly on the bill. If you are planning on a big purchase, it is recommended you check your score at least 2-3 months before the purchase to make sure there are no discrepancies on your report.
It is important to understand concepts of savings, budgeting, investing and managing debt. A sense of financial understanding lays the foundation for a lifetime of responsible money management, which helps people make informed financial decisions through their life.