The Foundtation for a Healthy, Happy Life
If you thought financial literacy was only for economists, think again. Now more than ever, Americans need to understand their finances in order to manage the other elements of their lives.
Achieving financial literacy starts with responsibility….taking responsibility for you own financial decisions.
Take Responsibility
Start with a budget. A budget means making decisions in advance, writing those decisions down, and then keeping track. Start with your income; not what you want to earn, but what you really do earn. Then list your expenses and subtract. If your expenses are more than your income, then make choices in advance. Balancing your budget may be as easy as replacing that $4.95 daily latte (plus tax) with a 35 cent cup of coffee at home for an annual savings of $1,109. Or it may be keeping track of your bank balance and paying your bills on time to avoid unnecessary bank charges. Or it may be a second job or selling that second car and carpooling or taking public transportation.
The point is, your budget choices are only successful if you make them in advance and stick to them. If you cannot afford a daily latte but you continue to buy it, you will go broke.
Help is available. The Financial Services Roundtable’s website, www.mymoneymanagement.net offers multiple budget worksheets. Operation HOPE will offer you classes or counseling.
Save
Easy to say….easy to do. Open a Roth IRA and automatically transfer $200/month into it. At an 8% annual investment return, you’ll have over $14,790 in 5 years. It builds up tax free and can be used as down payment on home, college expenses, or retirement. You can do virtually the same with a mutual fund or other investment vehicle. No one can do it for you. And no one can make you do it.
Establish Good Credit
Establishing and maintaining good credit is not rocket science. It’s common sense. It is paying all your bills on time, every time. Pay off you credit card balances every month for ordinary expenses. For larger items (a new roof, new tires, a hospital emergency), decide in advance how long it will take you to pay it off, and then stick to it. Always, always keep your credit card balances less than 80% of your credit limit, both in total and for each card.
Protect Yourself
Identity fraud can damage your credit and your reputation. Identity theft is a serious crime, occurring when someone else tries to illegally use your personal information to buy things on your credit, and then not pay it back. Here’s how to protect yourself:
1. Check your credit report. Under federal law, consumers have the right to a free credit report each year. Go to www.annualcreditreport.com.
2. Check your account statements. Suspicious activities will often show up in statements from your bank, cell phone provider, credit card issuer, or utility. Don’t ignore anything that you don’t understand. Online bank statements are updated daily and allow you to spot fraud faster.
3. Protect your personal information. Do not disclose your personal information, especially your Social Security number, mother's maiden name, driver’s license number, or account numbers, unless you are certain of the legitimacy of the other party.
4. A credit monitoring service will monitor your account information for you. Several good ones are on the market, but my organization sponsors a not-for-profit service that combines victim assistance, continuous monitoring and notification, and law enforcement. There is a charge that ranges from $10-18/month) and can be purchased at www.itacsentinel.com.
Whether you choose ITAC Sentinel or another service, be certain you obtain a victim assistance and credit monitoring service. Do not choose a product that merely freezes your credit at the Federal Trade Commission (FTC).
Seek Help
Plenty of resources exist to help. Ask at your bank, a financial advisor, your church, or even your local community college. The following are some resources available nationally which are helpful and reputable:
National Foundation for Credit Counseling (NFCC)- www.nfcc.org
Association of Independent Consumer Credit Counseling Agencies (AICCA) www.aiccca.org
In closing, remember this:
“You must take personal responsibility. You cannot change the circumstances, the seasons, or the wind, but you can change yourself. That is something you have charge of.”--Unknown