April was Financial Literacy Month. Financial service companies feel that Americans are financial illiterates who do not pay attention to the detail or the fine print. As financially literate people, we need to understand how we use our money when saving, spending and investing. It is expensive to ignore the lessons and it is time that we take action to better understand our financial future. The more we know, the better protected we will be.
Here are 6 areas of finance where we should start paying more attention to the details. For the next 6 weeks, take one of these at a time to move closer towards full financial understanding.
1. We can take small steps towards understanding. Focus on the details by learning about the different types of accounts at our bank and selecting the best fit for us. If we leave it up to the banker, they may put us into an account that makes them money regardless of how it works for us.
2. Learn about credit by selecting the credit card or loan with the best rates and terms. The details are there. All that we have to do is read and compare. Sounds easy but we don’t always take the time to look at the information since we aren’t sure where to start. When looking for credit, our credit history and score play a big part in what is available to us. Know your credit score and get your free annual credit report from freecreditreport.com or annualcreditreport.com. Use the math calculators on bankrate.com to figure mortgage rates and payment details.
3. Learn about budgeting. You can subscribe to my blog and others to get the knowledge needed to keep more money in the bank and to grow what you have. We need to know our household budget and we should be budgeting for our goals as well. The less surprises we have, the better prepared we are. Use a software program or an Excel sheet to plug in the numbers. The more often you do this, the better understanding you will have of your saving and spending habits. The more you understand the less money you will waste.
4. Learn about investing. There is so much information out there and we don’t have to figure it all out for ourselves. There are financial planners that will help our money grow as well as websites that are full of information and strategy. Earning a passive income through investments means that we won’t have to put as many hours in at the 9-5 job and we can enjoy more free time since our money is growing and working for us. Do you know the percentage you earned on your 401-k last year? If not, spend a few minutes reviewing the information from your statements.
5. Learn about tax planning. A CPA is knowledgeable and ready to help. Listen to their advice. They know what your numbers are and how to use them to your advantage. We have to pay taxes but we can be smart about the taxes that we pay by learning about the strategies available to our situation.
6. Learn about your insurance policies. Are you really insured with the best company? Do you have an agent that is available to answer your questions? If you didn’t answer yes to these questions, it might be time to do a little shopping. Know what your current coverage is and see if you can do better. Ask friends for referrals and interview at least 3 companies to see if you can get better coverage at a better rate.
I am a loyal customer and not a fan of plan hopping. But, if I feel that I can get a better value somewhere else, I will do a little research and ask a few questions.
Take one section a week and compare to see if you already have the best plan or if it is time for a change. This would be a good idea to revisit every year or two. By taking the time to compare every so often, we will always know what we have and not be surprised by the small print. Finances are complicated but they are not hard to understand if you invest a a little time and only work with advisors and sales people who can explain the details in terms that you can easily understand. If they can’t explain it, the product is of no value to you, it is only a money maker for them.
Put one lesson on your calendar each week and take a step forward. You won’t know everything you didn’t know at the end of the week but you will have made progress by spending a little focus time in each area. At the end of 6 weeks, reflect and act on what you now know. You should repeat this exercise as often as needed until you are comfortable with your financial decisions. It takes time to wrap our mind around financial literacy. The earlier we start, the savvier we will be with money and the less controlled we will be by the fine print.
I am here to help and answer any questions that you have. You can subscribe to my blog for future information or send me a message on my Facebook page at http://www.Facebook.com/ProjectDone which I will gladly answer.
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