April is Financial Literacy Month! “What does that mean to me?” you may ask. Well, it means it is a time to increase your financial knowledge and to work to understand your behaviors when it comes to your finances. Here are some tips to help you create financial literacy and independence.
Educate Yourself Early
Establishing and maintaining healthy and strong financial habits as early as you can (not as the result of major financial disaster) will help you go far in the long run. The foundation of financial literacy includes knowing how to save efficiently, establishing an excellent credit score, learning how to budget, and understanding your financial behavior in order to continually better it. Staying literate means consistently checking your bank balance, debt levels, and behavior.
Stick to a budget. Research before you buy. Have an emergency savings fund. Use coupons. While all these tips are important to follow, it’s important for your financial literacy that you understand your financial behavior. A good way to analyze your own finances is to track your spending. An easy way to do this is to keep spreadsheets of what you spend money on and how often you spend. Also, work to understand your relationship with money: what triggers your spending, and what helps you to control your urge to spend.
What You Should Save
The concept of building your savings is exceptionally important. Use the 50-20-30 rule. This means separate your monthly budget as follows: 50 percent of your monthly earnings goes toward essentials (mortgage, rent, groceries), 30 percent goes toward your lifestyle spending, and 20 percent goes towards your financial priorities (debt repayments, retirement contributions, and your savings). You may find a need to tweak the ratio of the 50-20-30 rule, depending on your personal situation, but allocating and understanding where every part of your paycheck goes is extremely important.
Know The Meaning of Financial Independence Being independent and financially literate before you bring another person into the picture is important to protecting your financial identity. Getting married or deciding to share mutual accounts means combining two financial personalities and habits. Create transparency with your partner by asking questions such as: how much debt are you bringing into the relationship, and how do you approach your finances. Whatever your individual histories are, make sure you have the financial literacy conversation with your partner before committing.
If you are looking to bring kids into the picture, be the role model for their future good financial habits by showing, not telling as you go. Let your kids help look for deals at the grocery store. Have a clear change jar in the living room that they can see on a regular basis. Let them earn an allowance with hard work. Help them save for a new bike or their first car. All these behaviors will help them be financially literate early in their life as well as help to hold you accountable for your own habits.
Being financially literate will help you make the most of your spending habits and will help you reach your financial goals. Remember, you are in control. Manage your money, don’t let it manage you!