April is National Financial Literacy Month, or a month set aside to highlight the importance of sound financial behaviors. Financial literacy is understanding and employing financial skills, such as budgeting, debt management, and investing. Personal finance is crucially important in the modern world and a lack of financial literacy can damage all aspects of a person’s long-term financial wellbeing and success. Individuals without financial literacy may accumulate unsustainable debt or have insufficient savings for retirement. In severe circumstances, the lack of financial literacy can also lead to poor credit, the inability to borrow money for education or to buy a house, and potentially even bankruptcy.
Improving financial literacy and bettering an individual’s financial position requires learning and practicing skills such as budgeting, managing debts, and investing. If you would like to improve your financial literacy, consider pursuing the following:
- Save for retirement. Contribute the maximum to your 401(k), or at least enough to maximize your employer’s match. Open an Individual Retirement Account (IRA) and roll over any 401(k)s from previous employers, and create a diversified investment portfolio of stocks, bonds, mutual funds, exchange traded funds, commodities, and diversified alternative investments.
To develop a sound retirement plan, reach out to First Bank Wealth Management.
- Create a budget. Track your monthly cash in-flows and out-flows each month by using First Bank’s Household Cash Flow Calculator. A comprehensive budget should include income, fixed expenses, discretionary spending, and savings.
- Manage debt. Use your monthly budget to reduce total spending and accelerate paying down existing debt. Pursue active debt payment strategies, such as paying down the loan with highest interest rate or the lowest balance first. If your debt appears unsustainable, then consider contacting a debt-counseling program.
- Manage your monthly bills. Pay your bills fully and consistently each month. If your monthly bills are unsustainable, find ways to reduce discretionary spending. Consider using automatic debits from a high-yield checking or saving account to ensure the smooth handling of recurring expenses.
To find out more about the high-earning checking and savings accounts First Bank offers, click here.
- Monitor your credit score—A good credit score has numerous benefits, such as access to quality loans at low interest rates. Keep up with your credit score with a free credit monitoring service. Make yourself familiar with the actions that can raise and lower your score, such as paying down current debt and credit card utilization rates.
For more information on credit, read: Understanding Your Credit Report.
With a little practice and some dedication, financial literacy is a skill anyone can develop that will pay dividends. Reach out to a trusted First Bank advisor to help you on your path to financial literacy.
By: David Frederick
|David Frederick, J.D., LL.M. is the Senior Vice President and Director of Client Success and Advice at First Bank Wealth Management and Adjunct Professor of Economics at Washington University. David may be reached by phone at 314-995-8764 or via email at [email protected].|