|There’s a lot to learn about money|
This month, learn how to make informed decisions about managing your money. The first step is taking charge. Regardless of your income, it’s wise to look for information on how to manage your finances, along with learning how to budget, save and use credit shrewdly.
Here are some steps to help you take charge of your finances:
- Set goals and work hard to reach them. You may want to write down your short-term and long-term goals. Then, set due dates for reaching your goals, and be realistic. After six months, check your progress and be flexible if necessary.
- Develop a Budget – Write down your total monthly take-home pay. Then list your monthly expenses and subtract them at the end of the month. By doing this, you can pinpoint areas where you could save. Use this information to set a monthly budget and allot savings. Review your budget monthly to ensure you’re on track.
- Start Saving – Even small amounts of money add up fast. Compound interest, which lets you earn interest on interest, will make your savings grow even faster. For starters, have part of your paycheck deposited directly into your savings account on a monthly basis. Shop for the best interest rates and make sure you understand all the fees and charges. Take advantage of your company’s 401(k) or invest in an IRA. As your income rises, increase the percentage you save.
- Manage Credit Wisely – Borrowing can help you meet long-term goals for an education, car or home. But borrowing for day-to-day needs and wants can get you into financial trouble. Before using your credit card, ask yourself if you really need to borrow the money. Try to avoid any spur-of-the-moment purchases and set a monthly limit on credit card charges. Pay more than the minimum, preferably in full whenever possible. Don’t fall into the minimum payment trap. It would take 61 years to pay off a $5,000 credit card balance if you only make the minimum monthly payment. In the end, you’d pay almost $16,000 in interest alone.
The Federal Reserve offers other personal financial education information and links to many useful resources. For more information, visit www.federalreserveeducation.org.