Financial knowledge doesn’t arrive overnight like an Amazon package. It takes a willingness to learn, time, and discipline. Combine this with systems tailored around you, add in some automation, and personal growth is bound to happen. This may allow you to live, give, save, and ultimately spend with a purpose.
Regardless of where your financial literacy stands today, here are some steps to take now that may create habits in your routine to assist your decisions and knowledge with money.
- Create a balance sheet:
- List out all the assets you own and their current value. This includes your home, retirement accounts, bank accounts, education accounts, other investments, autos, and collectables. When listing out your cash reserves how do you feel about what you are currently holding? How did you accumulate what you did? Do you have enough “emergency cash” to weather our current economic storm?
- Now list all of your liabilities. Be sure to include what you owe, current interest costs, and duration of each debt. This includes a home mortgage, equity line of credit, school debt, auto loan, and credit cards. Take a minute to reflect on the monthly payments required on those debts and the years remaining to pay them off. How long will it take and are you happy with that timeline? What steps can you take now that will lower your debts when you reflect on your balance sheet at the end of the year, in 3 years, or 5?
- Review your spending: Where’s your money going each month? Take a minute to locate a recent paystub and reflect on your pretax and after-tax withholdings. Log into your bank account and review your paperless statements over the past three months. If you charge all purchases to your card for points, review the last three months’ worth of statements. Are there any spending trends emerging? Are you happy with what you see? Are you spending too much on “stuff”? Should you be redirecting funds to other important priorities?
- Read: I can’t stress this one enough! Make sure you are reading not only your favorite newspaper or media outlets but books as well. Challenge yourself with topics and reading that you do not usually select in an effort to learn and grow on a particular topic. Consider different aspects to what you read including how outcomes would change if different behavior was implemented.
- Assess: Take a look at your current investment selection in your retirement accounts, how did you make this decision? Read the purpose statements behind the various fund choices you have available. Does your selection support your timeframe and first use of the monies? If not, what changes are necessary now?
- Evaluate your tax return: If completed by a tax professional what feedback or knowledge can you learn from your current approach? If you used software to complete your return how does your 2019 return compare to your 2018 return? Are you happy with your charitable giving? Are you on track to avoid a surprise next April?
- Enroll in a personal finance class online: With the move of all educational resources to online format and delivery you may find a class or schedule that works for you.
- Talk to a professional: Yeah, that’s us😊. Locating a CFP® professional may make this an easier process and keep you moving in the right direction.