Financial literacy is a crucial life skill. It improves your quality of life by letting you meet all your basic needs, which leads to a fulfilling and harmonious home life. Financial literacy even helps propel society forward, as it positions people to be better equipped to help each other and move forward without financial stress. This financial literacy month, we want to help you get started (or continue) on your journey to achieving financial wellness as you develop healthy attitudes and open up conversations about healthy finances. Check out these six tips to get started!
Have a steady stream of income
Making money is the first step to financial freedom. By evaluating your earning capacity, you can start budgeting accurately. Having a steady income can also help you offset debts, and you can even begin to set life and financial goals. That being said, you don’t need to become an overnight millionaire, what’s important is that you obtain a level of income stability. This means that you should seek opportunities for employment or start a side hustle so that you can set expectations on when and how much money you earn regularly.
Build your savings
It’s not enough to just focus on the now. If your income allows it, you also need to set aside money for future you. Living paycheck-to-paycheck could lead to stress and financial ruin. Experts suggest that you should save at least 20% of your income each month. They also recommend breaking down savings into three categories, savings for expenses within a year, expenses within the decade, and expenses for long-term goals. Understanding these categories can give you the motivation to save consistently. Savings let you work towards bigger goals like taking a vacation or buying a house. It also helps ensure that you have a comfortable retirement when the time comes.
Secure an emergency fund
Certain unforeseen circumstances, like sudden unemployment or hospitalization, are always possibilities. Take the coronavirus, for example, no one could have predicted the effect it would have on society. People have lost jobs and loved ones due to the devastating impact of this global pandemic. The goal of an emergency fund is to tide you through such challenging times. Although it’s ultimately up to you to decide how much you want to put away, a good rule of thumb is to have easily accessible money to cover at least six months of expenses. If that seems impossible at the moment, aim for $1,000 and build from there.
It’s okay to splurge from time to time, especially when it contributes to your goals. Taking out debts and using credit cards are regular occurrences even for financial experts. However, we all need to develop a healthy approach to spending and debt. Even though shopping has never been easier (thank you, Instagram ads), always remember to live within your means. Before making purchases, check out our online shopping tips, and always be sure to ask yourself whether you really need those items in your cart or if you just want them. Considering your goals every time you choose to spend will help you prioritize financial wellness.
Consult a professional
Figuring out how much to save, where to start, and which goals to set can get overwhelming. Luckily, you can always enlist the help of a financial advisor or counselor. Many credit unions have financial counselors on staff who would be happy to help you plan for the future. Locate a credit union near you to set up a consultation with a financial expert. With the credit union philosophy of “People Helping People” in mind, they can help you monitor your finances and create a personal financial plan that accounts for your goals to help you along your journey to achieving financial wellness.
Grow your money
If you are traditionally employed, this could be as simple as subscribing to a 401(k) plan for retirement. The recommended contribution is around 10% of your earnings, however, be mindful of what will work best within your personalized monthly budget, and be sure to check in with your employer to see if they will match your contributions. If you’re self-employed, then an IRA would be your best bet— your contributions will earn interest and will be kept safe until retirement. Furthermore, financial professionals can also assist you in employing strategies to maximize your money, such as investing in stocks and bonds.
Achieving financial wellness is a lifelong process, but once you get into the habit of managing your money in a smart, healthy way, it’s going to be a breeze.
Exclusively written for mcun.coop
By: Rhylee Jovie