In recognition of April being designated Financial Literacy Month, we shared 6 steps you can take to improve your personal finances in our last article. Here are 6 more things you can do to boost your financial literacy and your personal finances this month:
1. Make personal financial management a priority. For most people, the things that they prioritize in life are the things that get the majority of their time, effort and attention. So if you want to improve your personal finances, you need to make this a high priority.
Next, set priorities for different aspects of your personal finances. For example, maybe your top financial priority is paying down credit card debt or your home mortgage. Or perhaps you want to save enough money to put your kids through college without assuming any student loan debt. Or maybe you want to retire early.
Whatever your financial priorities are, write them down so you can refer to them often and gauge your progress toward achieving them. This will also help keep you motivated, especially for long-term goals like saving for college or retirement.
2. Set SMART financial goals. This is an acronym that’s sometimes used in the goal-setting process. SMART financial goals are:
- Specific, rather than vague.
- Measurable so you can gauge your progress.
- Achievable, or realistic, so you don’t get frustrated and discouraged.
- Rewarding so you stay motivated.
- Trackable with milestones and schedules you can monitor along the way.
3. Beef up your retirement savings. A number of recent studies have indicated that the retirement savings picture for many Americans isn’t pretty. According to a recent report by the Federal Reserve, the median retirement savings balance among all adults in the U.S. who have a retirement account is just $60,000 — far short of what most people will need for a comfortable retirement.
If you have access to a retirement savings plan like a 401(k) where you work, try to contribute at least the minimum amount required to receive an employer match (if one is offered). Set a goal of eventually maxing out your annual retirement account contributions, whether you’re contributing to a 401(k) plan at work or an IRA on your own.
4. Track your spending. One reason some people get into financial trouble or fail to achieve their financial goals is that they don’t have a good handle on their expenses. With credit and debit card usage becoming more prevalent, it can be easier to spend money without keeping track of where it’s going.
It’s fairly easy to track recurring monthly expenses like your mortgage or rent, car payments and insurance. Variable expenses that change from month to month can be trickier. One way to get a handle on these expenses is to write down every purchase you make for a month. You might be surprised by what you learn.
5. Reduce your spending. Now that you know where your money is going, you can begin to take steps to lower your spending. This will help free up cash each month that you can put toward financial goals you have set like saving for college or retirement.
Focus on discretional spending on things like groceries, entertainment and eating out. There are lots of ways to lower your grocery bill, such as clipping or using digital coupons and shopping at lower-cost grocery stores. If you currently eat out several times a week, cut this in half and instead prepare less-expensive (and healthier) meals at home. And set a limit for how much you’ll spend each month on entertainment like movies, the theater and concerts to keep these expenses in line.
6. Create a budget. If you have tracked your spending, then the budgeting process is already halfway done. The next step is to identify and record all of your monthly income, starting with your salary or wage. Also include any other sources of income you may receive such as child support, alimony, dividends or other investment income, life insurance proceeds or earnings from a side business.
Now compare your total monthly expenses with your total income. If your income exceeds your expenses, congratulations! You’ve got financial margin in your life and can devote the excess money to meeting financial goals like saving for college or retirement or making home improvements. If expenses exceed income, you’ll need to either lower your expenses (as described in the previous step) or raise your income — for example, by taking on a part-time job or starting a new business on the side.