When it comes to financial literacy, Americans have been let down by the school system, a system that leaves them ill-prepared to deal with spending, investing, savings and so forth. If you’re one of those people, the Top 10 things that we go over in this blog are sure to help you. Enjoy.
- You MUST earn more than you spend. There’s no way around #1. If you’re not earning more money than you’re spending, you will perpetually be in debt, a situation that is financially untenable.
- The earlier you begin to save money, the more money you will save. This sounds much easier to do than it actually is but, by using compound interest to your advantage, and starting as early as possible, you can use your money to make money. This is one of the keys to becoming wealthy.
- The higher the risk, the higher the rewards. Yes, keeping your money in a regular savings account is “safe” but, when you do that, you sacrifice the higher returns that you might get from the stock market as well as an IRA or 401(k) plan. A diversified portfolio used for long-term savings is also an excellent idea as, even though it’s risky, the rewards generally offset that risk.
- Diversifying your investments is vital to your financial health. Just like “putting all your eggs in one basket” might not be the best idea to handle eggs, putting all of your money into one stock or sector means that, if that sector loses value, you lose money. (And hey, even 2 baskets is better than just 1.)
- Be vigilant against scam artists and identity theft. It goes without saying today that you should monitor your financial accounts on a very regular basis to make sure that there’s nothing “fishy” going on that could mean that you’ve been the victim of fraud or identity theft.
- Make sure that you have plenty of insurance. Homeowners, renters, health, disability and life insurance come at a cost, no doubt, but the cost to you and your family if you don’t have them and a “worst-case scenario” happens can be devastating financially.
- Make your savings automatic. Taking advantage of a program that automatically deducts money from your paycheck and deposits it in your bank account or into a retirement or savings account is one of the best ways to make sure that you save money.
- Keep your debt load low. In truth, not all debt is negative as it allows people to buy homes and go to college. On the other hand, using credit cards to purchase everything in sight while you rack up thousands of dollars’ worth of debt is not recommended, for obvious reasons.
- Keep track of your credit report and credit score. Not only will this help you to keep your financial habits top of mind, you can also check for errors that may mean you been the victim of identity theft.
- Never stop learning. New products, new fees and new ways to save are always being invented by the financial services industry. If you keep up on these changes it will help you to possibly save more money and/or avoid changes that might affect you financially
And there you have them. The Top 10 things that you should know about money. Now, truth be told, we didn’t go into a whole lot of detail or depth. That being said, simply knowing these 10 things can be an excellent foundation for your financial future. Now it’s up to you to go out and do more research.