Financial literacy, financial capability, financial understanding.
Whatever the name, the core idea is the same: being equipped with the knowledge, skills and tools to manage your money and secure your future.
That’s no easy task, but here are five key money topics you’ll need to understand andput into action to make financial literacy a reality:
- Budgeting. Financial security starts with prudently managing your money on a day-to-day basis. That means spending less than you earn and saving consistently. Try to save at least 15% of your gross pay for short-term goals, long-term goals and unexpected expenses. Do it first and not with what’s left of your paycheck. Track all your expenses and set reasonable spending guidelines. Finally, don’t get caught up in how others are spending and undermine your own budget.
- Insurance. With so many different types of insurance — auto, renters, homeowners, life, disability, health and long-term care — and so many variations of each, insurance can appear daunting. But financial pitfalls abound if you’re not adequately covered. Insurance is at the foundation of any good financial plan. Learn the basics and get the coverage you need to protect your financial well-being.
- Emergency reserves. Stuff happens. And one of the best ways to keep that stuff from throwing you off course or burying you in debt is to set aside money in a separate savings account for emergencies.
- Debt and credit. Debt can be a useful tool, but it can also be a dangerous trap that undermines your financial health. Minimize your use of debt and understand the world of credit and credit scoring.
- Investments. Stocks, bonds, mutual funds, CDs, annuities — the universe of potential investments is massive. Not to mention the dizzying array of account types: taxable, IRAs, Roth IRAs and company retirement plans like 401(k)s. But, confusing as this may appear, investing is not rocket science. Read and learn. And remember, it’s never too early to start investing.
This isn’t a comprehensive list, but if your goal is financial literacy, it pays to gain a basic grasp of these five elements. If you’re not there yet, keep working toward the goal. If you have gaps, find a person or organization you trust to help close them.
Most importantly, turn your knowledge into action.
The USAAVoice Team is committed to providing information that helps to facilitate the financial security of the military community. The advice in our content is grounded in the principles of sound money management and covers a range of topics, including personal finance, retirement, investments, auto, home, life, health and other areas relevant to our business and the audience we serve.
Investing in securities products involves risk, including possible loss of principal.
Views and opinions expressed by members are for informational purposes only and should not be deemed as an endorsement by USAA.
This document is not legal, tax, or investment advice. It is only a general overview under the federal tax laws. The law concerning retirement plans is complex, the penalties are severe, and the laws of your state may differ. Consult your tax and legal advisers regarding your specific situation.
USAA means United Services Automobile Association and its affiliates.
Financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency, Inc. (known as USAA Financial Insurance Agency in California, License # 0E36312), a registered investment adviser and insurance agency and its wholly owned subsidiary, USAA Financial Advisors, Inc., a registered broker dealer.
Source : www.forbes.com
