What’s the best (and cheapest!) took to develop sustainable financial wellness? Education. So, as Financial Literacy Month concludes this April, we’re taking a look at five money skills everyone should master.
Pay Yourself First
Everyone knows it’s important to save—but actually setting aside money for college, or retirement, or any other savings goal is easier said than done. That’s why financial experts say: pay yourself first.
The idea behind “pay yourself first” is that you pay into your savings at the same time you pay your bills. In other words, approach savings as a non-negotiable expense which comes early in the financial planning process, rather than a place to put leftover money at the end of the month. Adopting the “pay yourself first” ethos can help to prioritize savings and reduce unnecessary spending, letting you build funds faster and invest for the future.
Treat Credit Like Debit
Credit cards, when used wisely, can provide financial security, help to build your credit, and even offer lucrative rewards. And yet, credit cards can also land users in significant debt.
The key to getting all the benefits of a credit card with none of the financial drawbacks is to treat credit like debit. This means using a credit card to spend money you already have, rather than putting purchases you can’t afford onto a card and hoping you’ll be able to pay it off later. You can start by automating credit card payments so your bill gets paid every month, without accruing late fees or interest. Tracking what you spend and budgeting expenses ahead of time are critical, too.
Negotiate Costs
How skilled are you in the art of negotiation? Many people don’t consider negotiation to be an important money skill, but it can save you a good amount of cash in the long-run.
A good place to start is with your internet provider. Many internet providers offer a low introductory rate, which increases without notice a year or two into your contract. If you notice a higher-than-usual bill, call up the company and ask about options. Often, a provider will lower your bill or explain different rate plans. The same goes for phone plans, gym memberships, cable TV and insurance. Asking about bundled options might also help to lower your final bill.
Maximize Tax Advantages
Tax law is designed to support certain kinds of saving, spending and investments, so it pays to know what advantages are available.
The most obvious example of tax-advantaged savings is the Individual Retirement Account (IRA), which offers significant tax advantages on money you save for retirement. Opening an IRA, and funding it with the maximum allowable annual contribution, is an important step in the financial wellness journey. Other deductions and tax credits tend to change with the government, so be sure to stay updated. For example, there is now a deduction on new vehicle interest payments, although sadly used cars don’t qualify for the deduction, and a previous tax credit for electric vehicles has been eliminated.
Know Where to Turn for Help
Being skilled in money management also means knowing when it’s time to ask for help, and what resources are available.
Food pantries are an essential resource for anyone struggling to afford groceries. Sadly, many people don’t take advantage of food pantries. Remember: it’s okay to visit a food pantry even if you are safely housed, are earning an income, or didn’t previously need this resource. In terms of financial education and support, Harvard FCU members get free access to the GreenPath Financial Wellness program, which offers free debt counseling, a personalized debt management plan, housing counseling and more.