From the Federal Reserve Board: There’s a Lot to Learn About Money
Every once in a while I come across a gem of a publication regarding personal finance. They usually address specific topics getting the best deal on a car loan, or saving money at the grocery store. This one, which I have decided to reproduce here, is sort of different, as it’s sort of a roadmap to taking charge of your financial future.
It gives you sort of a bird’s eye view of what you should be doing in order to be on top of your finances. Some of the topics have already been covered on this blog, in which case you’ll find links to the articles. Some others have caught my attention as potential material for future posts.
Here’s the Federal Reserve Board’s “There’s a Lot to Learn About Money” recap:
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YOU CAN TAKE CHARGE OF YOUR FINANCIAL FUTURE
Take Charge
It’s possible to meet your financial goals — whether your income is small, medium or large.
By looking for good information on managing your finances, along with choosing to budget, save and use credit wisely, you can:
- Buy a home.
- Send your child to college.
- Start a business.
- Pay off debts.
- Put money away for a rainy day.
- Save for retirement.
No matter who you are, you can take charge of your financial future. To get you started, here are some simple tips:
1. Set Goals
Most people who have money didn’t get it overnight. They set goals and worked hard to reach them.
Write down your short-term and long-term goals. An example of a short-term goal is saving up for holiday gifts; a long-term goal is saving for a home.
- $Set due dates for reaching your goals.
- Be realistic.
- Be flexible. (It’s OK to adjust your goals and strategies.)
- Go back and look at your goals after six months to check your progress.
2. Develop a Budget
Find out where your money is going. Unless you’re tracking your money, it’s probably not going where you really want it to.
Write down your total monthly take-home pay. Then list your monthly expenses. At the end of the month, subtract those expenses from your total pay.
- Look for places to save.
- Use this information to set a monthly budget that includes saving.
- Review how things are going each month.
Carry a small notebook. Write down everything you spend. Include small things like candy bars.
3. Start Saving
Small amounts of money saved regularly add up fast. Compound interest, which lets you earn interest on interest, will make your savings grow even faster.
Open a savings account. Have part of your paycheck deposited directly into your savings account every month.
- Shop for the best interest rates.
- Understand all fees and charges.
- Take advantage of your company’s 401(k) or invest in an IRA (individual retirement account).
- As your income rises, increase the percentage you save.
- Know that the greater the potential profit on an investment, the greater the potential risk of losing your money.
The earlier in life you start saving, the more you’ll have later.
4. Manage Credit Wisely
Borrowing can help you meet your long-term goals for an education, car or home. But borrowing for day-to-day needs and wants gets many people into financial trouble.
Before using your credit card, getting a payday loan, renting-to-own or borrowing against your home’s equity, ask yourself if you really need to borrow the money.
- Avoid spur-of-the-moment purchases.
- Set a monthly limit on credit card charges.
- Pay more than the minimum on your credit card bill.
5. Protect Your Credit Rating
Lenders use credit reports to decide whether to loan money. Insurance companies, landlords and employers also check credit reports. A report that shows defaults or late payments— even 30 days late—can mean not getting a loan or paying a higher interest rate.
- Find out your credit rating. Call a credit bureau for a copy of your report.
- Pay all bills on time.
- If you’re having trouble paying bills, get advice from a reputable nonprofit organization before you become delinquent.
- Check your credit report every year.
- Alert the credit bureau if you see errors in your credit report.
6. Get the Best Deal
When you borrow money, you have a right and a responsibility to know all the loan’s terms and conditions. Ask questions and compare interest rates and fees. Know what’s at stake if you don’t make your payments.
Before you borrow money, ask these questions:
- What is the interest rate?
- What are all the fees?
- How much will I have paid in interest when the loan is paid off?
- Can I pay it off early without penalty?
Also:
- Shop around and compare. Don’t get taken.
- Question an offer that makes borrowing sound too good to be true.
- Always read and understand the fine print.
- Seek help if you need it.
7. Take Control
Getting the right information can help you gain control of your finances.
- When you need information, make sure the source is reliable.
- Know who you are dealing with.
- Make sure the resource is credible and properly trained, accredited or certified.
- Ask for references.
- Understand any fees or charges.
- Make sure they’re not trying to sell a product or service.
- Avoid resources that charge excessive fees.
- Ask questions.
8. Learn More about Money
There’s a lot to learn about money, and there’s plenty of free information available. The Federal Reserve education web site offers personal financial education information and links to many useful resources.
Look for organizations in your community that can help you learn more about setting financial goals, budgeting, saving, using credit wisely and getting the best deal. Here are some possibilities:
- Nonprofit credit counseling service
- Library
- Community college
- Bank or credit union
- Nonprofit community development corporation
- Nonprofit housing organization
- Religious organization
- Senior citizen center
- Employee assistance program
- County extension service
“No matter who you are, making informed decisions about what to do with your money will help build a more stable financial future for you and your family.” — Alan Greenspan
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