Ah, personal finances. They are something most of us are afraid to tackle.They can also be something we try to put off for as long as possible. And yet, having even the most basic personal financial skills is a fundamental part of adulthood. Being financially savvy sets you up for the secured, happy life you want to live.
Investing time and energy into your finances is time well spent. It helps you establish your future, including when you can retire and how often you can take a well-deserved vacation. It can also eliminate or reduce stress, particularly if you find yourself panicking every time a credit card bill arrives. The more you know about your finances, the more confident you will feel about your personal situation.
Even if you have a good handle on your money, there may be areas you’ve forgotten to focus on. Never fear! We’re here to help you get a handle on all aspects of your personal finances. So keep reading and start strategizing. Because no matter where your finances are now, you can improve them over time.
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1. Credit Score
Unless you’re in the market to take out a big loan, you may not think about your credit that much. However, your credit score is one number that you want to keep your eyes on. Your credit determines whether or not you are approved for loans. It also determines interest rates and your ability to rent properties.
The three main credit bureaus — Equifax, Experian, and TransUnion — allow you to check your credit score once a year for free. Once you have this number, you can then see how much work you need to do to improve it. A good score is anything typically above 670. If you’re looking to improve your credit, think about opening a secured credit card. With these cards, you put down a set deposit so you don’t have to worry about defaulting and hurting your score.
2. Interest Rate
Student loans, credit card bills, and mortgages all have interest rates. Checking your interest rates help ensure you are paying off your debt smartly. The bills with the highest interest rates should ideally be paid off first. This will help you save more money in the long run. Paying off your debt consistently each month can help you stay on top of your goals.
If you need to open a new savings account, ask about interest rates. It’s a good idea to shop around to different banks and see what they offer. And if you have built up your credit, you have the power to ask for a better interest rate! Securing the best interest rate may take a bit of work, but it is worth it.
3. Net Worth
We all like to see the progress we’ve made. Your net worth is essentially your financial report card. It’s the big number that tells you how much you are worth. You can calculate your net worth easily by subtracting your total debt from your total assets. Make sure to include all of your assets including 401(k) retirement savings plans, stocks, and other investments.
Obviously the easiest way to increase your net worth is to spend less and earn more. Practically speaking, however, that’s not very easy! Doing a budget review to see where you are spending each month can help. You may also want to consider paying off big debts such as mortgages. Above all, doing this calculation can better illustrate where exactly you stand.
4. Emergency Fund
The pandemic has certainly kept all of us on our toes. Besides the health crisis, the economy has been on a roller-coaster ride from the very start. You or a family member may have lost a job or been forced to relocate. You also likely noticed a jump in prices for standard goods including gas and groceries. These are all reasons to either reallocate more funding or start building your emergency fund.
An emergency fund can be built slowly over time. You can set aside money automatically from your paycheck to a separate account. Saving even $50 or $100 each month will build up over time. There are even emergency fund calculators that will determine how much you should save up over time. Having this fund will create peace of mind, so you’re prepared no matter what life throws your way.
Takeaways
Getting a handle on all aspects of your personal finances will help you feel more secure and reassured. Even if you have some work to do, you can find a place to start today. You understand how much you are making and where you need to put your energy. You also generally know how much leeway you have each month for spending.
While your financial goals are personal to you, working with a financial expert or a wealth management company can be helpful. They can help steer you in the right direction if you are completely lost. Having them as a resource can also be beneficial if you need an accountability partner. But whether you tackle your finances by yourself or with someone, taking the first step is the hardest part.
