Financial literacy for families.
What is financial literacy? It can be defined as the ability to understand and apply financial skills. Many families across the country have a general idea of their financial standing but wish they knew more. Follow these tips to help improve your financial literacy and your financial standing to the best of your ability!
Implement a money management plan
Understanding your finances comes with creating a budget that is simple yet effective in making you as organized as possible with your money. This process doesn’t need to be a daunting task, it’s rather simple if you break it down into smaller steps and use the right tools.
With the proper resources and devising a way, you want to track your finances, follow this through taking the time to sort out all of your monthly expenses. It’s recommended to do this by each bill’s due date, this way you have a general idea of what your month looks like in terms of spending.
The knowledge surrounding your monthly income is never a step to avoid. Knowing the total amount of money you and your spouse make will come in handy when making a budget. When calculating your total amount of income for the month remember to include your regular paychecks along with any side hustles you participate in as well.
After finding your total income and monthly expense, prioritize time to figure out the amount of money you leftover. To do this, take your total income and subtract your total expenses. The remaining balance should be split so you have some extra spending money and the rest to save in an emergency fund.
Create an emergency fund
An emergency fund is a crucial part of financial planning and taking a deeper dive into your finances. Dave Ramsey says “only 39% of Americans could cover a $1,000 emergency.” This staggering fact shows that many individuals don’t actually create an emergency fund.
In the previous tip we talked about splitting the remaining balance of your income after subtracting out your expenses into two portions, one half to be spent and the other to be saved. Now that you have a sum of money to be saved each month it’s time to open a bank account and start depositing every month!
If you don’t already have a bank account designated to just savings, it is important to do a little research to find the best financial institute to fill all of your needs when it comes to your money. In today’s world of being on the go, it is very important to have access to your money from the tips of your fingers. Since emergencies can happen anywhere, try using a service that supports financial management from your smartphone. That way, you have easy access to your money from anywhere, all while receiving checking account updates in real-time.
Handle your debt
Most people carry around some sort of debt, whether it’s caused by credit cards, a mortgage, or student loans. In order to boost your financial standing, a great place to start is by creating a plan to pay off your debt quickly and efficiently. There are two ways you can pay off debt: The Snowball Method and the Avalanche Method.
While it’s important to pay at least the minimum monthly payment, the Snowball Method requires you to pay extra on the loan or bill that has the lowest balance. After paying off that loan you then move on to the loan with the next lowest balance. If you’d rather work from highest to lowest than the Avalanche Method is for you.
Financial Literacy can certainly be stressful for families, but it’s imperative to make the best of it through making it a family activity. It’s never too early to start learning about money and can create great habits not only for yourself, but for other members of your family as well.