In honor of Financial Literacy Month this April, I want to talk about the importance of understanding and taking control of your financial lives. No matter what your age, gender, socioeconomic level or marital status, it’s important for everyone to have a basic understanding of personal finances.
As a small business owner, financial literacy and management has been an essential part of my success. When I started my business, I had to learn very quickly what worked financially – and what didn’t.
Pro tip: A financially literate business owner is more likely to be fully in control of their business.
According to the Turbo #RealMoneyTalk survey, for nearly half of Americans (47%), the topic of money was never or rarely brought up in their household when they were growing up.
Maybe you are a wiz at financial literacy or maybe some of this might be new to you, whatever the case, it will be helpful and important at every stage to make the important financial decisions. So whether you are looking to secure a loan, pay for college or buy a house these tips will help you earn and save more, waste less and generally get in control of your financial future. Start off with some quick tricks you can commit to, and even if you don’t get through the whole list this month, there’s always the next one.
If you ever wished for an easier way to figure out what you should do to improve your financial health– flex your personal finance muscles this month and check out some of my tips below.
Set a budget
First things first. This is the starting point for every other goal in your life. You can’t make progress if you don’t know where your money is going each month. Compile a list of your debts and calculate your income.
Try rethinking the way you budget. Take stock of what you’re paying each month for small things like magazines, software, and online-service subscriptions, for example. Decide what you really need and what you can live without. Consider cooking your own meals or switching to generic products when you buy groceries.
Know your DTI
Debt to Income ratio or DTI is your total monthly financial obligations – or debt – divided by your total take-home pay. This includes your rent and any outstanding loans – including student loans. Basically, are you living in your means? We know, yuck.
Then, put together a budget that includes your monthly spending.
To make sure you’re being honest, print and look at your statements from the last few months — including debit and credit cards. HERE’S A PRO TIP: factor in expenses that don’t happen every month, like your annual Amazon Prime membership.It’s hidden money that you’re spending, even if it is only once a year.
If you have no idea what your DTI is, don’t stress. You can easily calculate it with the free Turbo app.
Kick your assets into shape
Credit is a critical part of your financial picture. It represents how reliable a borrower you are, how well (or poorly) you manage your debt. So do you know what your number is?
If not, you can use the Mint app and they’ll help you get your score, understand what your score means, show you how to improve your credit, and help you keep your credit safe. The best part? It’s free.
Pop quiz: Will checking your credit report hurt your credit score?
The simple answer. No. If It’s a soft inquiry and more of a routine credit check that doesn’t need to be done with your permission.
Auto-save when you get paid
Money money money. There’s nothing like a huge chunk of money hitting your account during payday. So what are you going to do with it? A night in the town with your girls? Maybe you’ll buy that new bag you’ve been eyeing? Better yet, pay your rent?
Here’s the problem: The danger lies in having a lump sum of cash in a single account. Because if you have, say $3,000 in your checking, chances are you’ll spend all of it.
Pro tip: Divide your paycheck toward your savings goals. Your paydays are when you have the most money to work with. Use that power to allocate your earnings where you see fit. Set up an auto transfer to pay off my student debt, different savings goals, an emergency fund, vacation fund, and for retirement.
Figure out your daily spend number
I will be the first to admit this, I actually loathe making money decisions on a daily basis. What I do instead is figure out this information on a monthly basis so I know how much I can roughly spend each day on discretionary stuff. That way all my bills and saving goals are accounted for.
Let’s be honest there is nothing more annoying that deciding if you can afford that lunch out or that fancy wine at the bar. That daily number keeps me on track. You can also check your balance and goals on the Mint app to make sure you’re not overspending.
Start an emergency fund
Let’s hope there is never an emergency, but by stashing some money away for an unforeseen emergency can make you feel more secure. Experts say you should have three-to-six months’ worth of savings in an emergency fund. So start saving!
Even putting away small amounts of money on a monthly basis can help. This could help build your savings passively over time. You can automate so that money transfers directly from your paycheck into your savings account, or use mobile alerts as reminders.
Consider side hustles
In this day and age, if you don’t have multiple sources of income you are just getting by. The era of working one job your entire life is over, and when it comes to finding ways to make extra money on the side, millennials are very creative with their side hustles. Some side hustles pay well and some are passion projects, but let’s face it, anyone who does this on their free time knows how empowering it can be to have a cushion in your bank account.
Here are some hide hustles that can help you make money ASAP.
Savings and retirement
The beauty of setting your finances on autopilot: If you can’t see it, you won’t spend it. Auto-saving means fewer decisions you have to make about your money.
Here are some options: Putting savings in a post-tax Roth or pre-tax traditional IRA. or if you’re self-employed a SEP IR. I auto-transfer a set amount into my IRA each month.
If your workplace has an employer-sponsored retirement option, such as a 401(k) plan, save as much as you can. Because the money will come directly out of your paycheck, chances are you’ll hardly even notice it. If your employer offers a matching contribution, aim to contribute at least enough to get the full match.
It does not matter how much or how little experience you have navigating the treacherous waters of personal finance. There is always something that you can learn that will make it easier for you to protect your savings and get more out of your finances. Let us know how you’re flexing those financial muscles this coming month in the comments section below.