Financial Literacy Month: Get Started with These 10 steps
Financial Literacy Month is a celebration. It's a chance to learn and become aware of the state of your personal finances. It’s also an opportunity to improve those finances, one step at a time. Take these first 10 steps and start improving your financial situation. April is officially Financial Literacy Month, but you can take these 10 steps any time you're ready!
STEP 1: Decide to Start
The first and most important step in developing and following a financial plan is to make the decision to start. Have you taken a moment to examine your attitudes about money? Jot down the answers to the following questions on a piece of paper and post it where you can see it
1. Do you want to change your financial situation?
2. What is one area you want to change?
3. What is one benefit you hope to gain by changing your money management behavior?
STEP 2: Analyze your situation
Do you have an idea of how you are doing financially? What are your strengths? What are your
areas of improvement? This is a great opportunity to be honest about your relationship with
1. How much do I have left over every month?
2. How do I feel when I do my bills? Am I stressed?
3. How much have I actually saved for an emergency?
4. How much do I have saved for retirement?
STEP 3: Get a copy of your credit report and start the clean-up, if necessary
Your credit reports can provide a snapshot of your overall financial situation. Reviewing your credit reports for accuracy can also help you to identify errors or fraud. Fortunately, it is easier than ever to obtain copies of your reports. The FACT Act gives every consumer the right to a free credit report every year from each of the three major credit bureaus: Equifax, Experian and TransUnion. To get your free report, simply visit annualcreditreport.com.
Need help understanding your credit report? Contact Global and ask to speak to a financial coach. We have financial coaches who are credentialed and understand all the ins-and-outs of credit.
STEP 4: Face your Debt: Add it up and start to pay it down
Freedom from debt is an achievable goal, for everybody! To regain control, the first step is to take an honest look at your existing obligations.
Let’s begin by adding up exactly what you owe. You can find out the total debt you owe by including your total debt, monthly payment, your interest rate and the due date for these payments. After you have added your total amount of debt, you will want to calculate your DTI
or (debt to income ratio). This ratio will tell you exactly how much of your income is going towards your debt payments.You will want to strive to bring this number (your DTI) as low as possible.
This will not only help you pay off your debt faster, but it will also help with tracking your debt relief process. You will want to refer back to your debt list frequently. You can do so by keeping your list in a convenient location like in the notes section on your phone or an excel spreadsheet on your laptop or home computer.
Pro tip: Update your list frequently (at least monthly) to watch your debt decrease and motivate you to keep working hard!
STEP 5: Set your priorities
The first step on setting your priorities is to create a list of needs and wants. This list is another resource for you to fall back on that will help establish your financial priorities. Paying off credit card debt is often the first order of busines for most people. This is because credit cards tend to have higher interest rates and fees than other forms of debt. Credit card debt gets first priority because these higher interest rates will be adding up more debt faster than you can pay it off. If you have multiple credit cards, you can choose to begin paying off the credit cards with the lowest balance. Knocking off small and more manageable debts can give you the confidence boost that sets off your path to financial freedom. This tactic can also be referred to as the “debt snowball.” Think of it as a way of building momentum as you pick up and remove the smaller debts; working your way up to your larger debts.
STEP 6: Set your financial goals
The purpose of setting your financial goals is to decipher your “why.” Don’t simply think “I want to eliminate my debt” but rather “why do I want to eliminate my debt?” Attaching your why to your debt elimination goals fuels major motivation (especially when the burden seems too
heavy). Many people fuel their debt elimination motivation by simply picturing how their lives would be different if they reached financial freedom. Whatever your ‘why’ is, imagine it, push for it and watch your dreams come true.
STEP 7: Expect the unexpected – Start an emergency savings account
Unfortunately, bad things sometimes happen. That is why it is vital to have three to six months living expenses saved for emergencies. If 2020 taught us anything, it’s that we have to be as prepared as possible for the unexpected. While we all have future savings goals, having an
emergency fund is a whole other priority entirely. Emergency funds are vital to support present unaccounted for needs, like a broken-down vehicle, medical or dental bill or even a last-minute family activity.
That is why Global Credit Union focuses on motivating our members to prioritize building an emergency savings fund. By learning to expect the unexpected, you can keep a minor financial setback from turning into a major financial crisis. The easiest way to begin saving for the unexpected is to schedule consistent automatic contributions to an account that is not conveniently accessible. Take a look at Global’s Smart
Savings Account to learn more. It is a high rate savings account that helps you quickly build that emergency savings goal.
STEP 8: Wait! And save for your big goal
Don’t fall into the trap of buying your big goals too quickly or falling for financing traps. You need to commit to saving. After all, saving is an essential part of any money management plan.You can do this by setting money aside each month to save for your short-, mid-, and long-term
goals. If you are having trouble establishing a nest-egg, don’t despair. It takes time.
STEP 9: Write down your spending and figure out ways to reduce it
Record all of your expenses - fixed, periodic and variable. This is a good way to examine where your income and expenses meet (or possibly fail to meet). Did you know that the average American spends about $1,100 on morning latte trips to the coffee stand? That equals out to roughly $92 a month on coffee. Recording your expenses can help you decide where budget cuts need to be made in order to reduce spending.
And now with online banking, transaction tracking is easier than ever! Global offers a free personal financial management tool: Money Management. It is a set of tools and features for you to track your financial spending with ease. It’s easy to use too, automatically available to
you when you log into eBranch.
STEP 10: Find your Team
Managing your finances can be like getting ready for the super bowl. There are so many little pieces that need to fit together to create the “big picture” and get you to the big game. Working with one or more financial professionals can help you keep everything straight. Check out Global’s Retirement and Investment Services or contact us to discuss which financial coaching option is right for you.