INTRO
For a lot of people, the financial world can be confusing, opaque, and downright scary. There are so many terms, so many options, and just one or two missteps can cost you thousands of dollars that you didn’t know you had to lose in the first place. The good news is that there are some financial basics that everyone should know – and these five things are among the most important ones of all. This will help ensure that your money stays where it belongs – in your pocket!
1) Set up emergency savings
One of the most important financial basics is to have an emergency savings account. This will help you cover unexpected expenses without going into debt. You should aim to save enough to cover three to six months of living expenses. To start, set up a budget and automatically transfer a fixed amount of money into your savings account each month. As your income increases, you can gradually increase the amount you save.
2) Pay off your credit card balance in full every month
One of the most important financial basics is to always pay off your credit card balance in full every month. This will help you avoid paying interest on your balance, and will also help improve your credit score. You should also make sure to have an emergency fund to cover unexpected expenses, and to save for both short- and long-term goals. Additionally, it’s important to invest wisely and to diversify your investments. Finally, make sure you understand your taxes and stay up-to-date on any changes that could affect you. By following these financial basics, you’ll be on your way to a bright financial future.
3) Don’t carry a lot of debt
It’s important to keep your debt load low so you can afford your monthly payments and still have money left over for savings and investments. A good rule of thumb is to keep your total debt (including mortgage) at or below 36% of your gross income. If you’re looking to get a handle on your debt, start by creating a budget and setting some financial goals. Then, work on a plan to pay off your debt using the avalanche method (paying off the debts with the highest interest rates first) or the snowball method (paying off the smallest debts first). You can also try negotiating with your creditors to get a lower interest rate or extended payment plan.
4) Invest, even if it’s small amounts
Investing is one of the most important financial basics everyone should know. It’s important to start early, even if you can only invest small amounts. The sooner you start, the more time your money has to grow. And don’t forget, the earlier you start investing, the more time you have to take advantage of compounding.
5) Track your spending using apps
One of the most important financial basics is knowing where your money is going. You can do this by tracking your spending using an app. This will help you see where you can cut back and save more money.
