You may never have thought about financial literacy, but you need it if you want to build wealth and stay financially responsible. Whether you’re just starting or have been managing your finances successfully for some time, there’s always more to learn. Keep reading for our best tips on improving your financial literacy.
If you don’t know where to start when it comes to managing your finances, think about your personal goals and money struggles. Write down your ideas and consider which aspects of the finance world apply to you. For example, you may want to learn more about increasing your credit score or budgeting your income. There are countless resources online that break down these concepts in beginner-friendly ways. Financial blogs, books, and podcasts are also excellent ways to stay ahead of current trends and events.
Create a Budget
A detailed budget is the key to financial literacy. It will help you get an overview of how much money you have coming in and where it’s being spent every month. To create a budget from scratch, list your monthly income sources, bills, and expenses. Next, place each expense into a category: fixed or variable. Fixed expenses stay the same every month (think: rent or mortgage payments), while variable expenses change (dinner or vacation costs).
The money you have left at the end of each month (after paying your bills) can be saved, invested, or used to pay down your debts.
Invest for the Future
Investing your money wisely can help you grow your income in your sleep. But it’s easier said than done to build a winning investment portfolio. Before investing, do your research. Every type of investment has risks and rewards, and it never hurts to speak with a professional advisor.
Monitor Your Credit Score
Financial literacy and a strong credit score go hand in hand. When you keep a high credit score, you can leverage it to get loans and financing when needed (responsibly, of course).
Stay on top of your credit by checking your score regularly. Make sure your reports are accurate, and dispute anything that’s not right. Our favorite websites for free credit monitoring are Credit Karma and Credit Sesame.
Pay Off Your Debt
All of your hard work building your credit score will go to waste if your debt-to-income ratio is off. Use your new budgeting skills to create a plan to pay off your debt. Start by making a list of everything you owe (highest interest rate first). This is a great way to avoid extra fees as you pay off your loans and statements.