Surveys indicate that many Americans lack basic financial literacy. Yet, simple money-management skills can help prevent a person from getting themselves into financial trouble and help them lead a better life in general. This article covers a few basic money-management concepts. Insurance and financial services professionals, such as a NAIFA members, can give you much more information and help develop strategies to boost financial literacy and get your money management on the right track.
Establishing An Emergency Fund
The very first thing that anyone should do if they want to insulate themselves from potential financial harm is create an emergency fund. The amount to set aside for emergencies varies based on individual circumstances, but most experts recommend between $500 and $1,000 to get started. For many, that is enough money to help allay an unexpected expense. No matter who you are, a vehicle can break down, an unexpected medical expense can arise, or any number of other unexpected expenses may come about and cause problems for someone who does not have the shelter of an emergency fund. As your finances grow more complex, a larger emergency fund may be appropriate.
Create A Durable Budget
There is no one way to create a budget that works specifically for everyone. Different people have different preferences and personalities when it comes to monitoring their money. Some people prefer keeping track of income and expenses manually in a spreadsheet. Others prefer using technology tools, many of which are available online. Again, many financial professionals can help their clients with basic budgeting strategies.
Avoid High-Interest Debt Or Pay It Off Rapidly
Avoiding high-interest debt is often easier said than done. By the time you are reading this, you may already have been drawn into the world of credit cards and personal loans. These can be damaging to your financial health, but they are also advertised heavily across many media channels. The allure and appeal of these forms of debt are too strong for many to avoid.
It is best to pay off these debts as rapidly as possible as they are only going to make it that much harder to get ahead in the long run. Put as much money as your budget will allow towards paying off these debts after essential responsibilities are handled.
Don't Forget About Life Insurance
Many people learning the basics of money management don't consider the benefits of life insurance or maybe they think they can't afford it. Even if you have coverage through work, it may not be sufficient, and you are very likely to lose the benefit if you move to a new job. However, adequate life insurance coverage can be essential, especially for young families, couples with mortgages or other shared housing expenses, or anyone with other people who rely on them for financial support.
And life insurance may not be as expensive as you think. Especially if you are young and healthy, a NAIFA member can likely help you find suitable coverage.
These are just a few of the best ways to begin to get your financial footing. Consider these ideas and any others that may be of use to you to start to get on the right path as far as your finances are concerned. It is the easiest path towards living a good life.