Despite being such an important life skill, financial management isn’t something taught in school. Trying to learn about it yourself can seem daunting, but don’t let sources with technical language and graphs scare you. When financial management is explained in plain English, it’s not as complicated as it seems—and it’s a damn good skill to have.
Build a savings account, no matter how small. I know this is the most repeated advice ever but it truly is the root of all other financial successes. This doesn’t mean you have to put all extra cash into savings and never buy anything nice for yourself, of course. Decide on a percentage or flat amount of the extra money to save every month and stick with it. Even if you can only afford to put away $20 a month, that adds up and could save you down the line.
Keep savings in different places. By the time you save even a few hundred dollars, get in the habit of keeping your money in different places. I don’t mean hiding half your cash in the freezer and the rest under the mattress. You may have heard throughout recent years of incidents when big bank companies had serious financial troubles of their own. These incidents can come completely unexpected and affect all customers, big or small. To avoid having your savings wiped out to pay off your bank’s own loans, don’t keep all your money with one banking company. When you have several hundred to a couple thousand dollars in savings, keep at least a few hundred stashed at home. If you grow your savings into the thousands, open an account with a different bank and keep half there.
Bank with a credit union. Credit unions offer a safer place to keep money than regular banks because they’re less prone to financial incidents. They also offer more perks for members, take fewer fees, and give much better rates for loans. They may have fewer locations than other banking companies, but with online and mobile banking, that’s not a great setback. Suncoast Credit Union, based in the southeast, is a good option and offers helpful customer service.
Keep track of your credit score and work to build it up. Using debt is a necessary evil for anyone who doesn’t have a six-figure income. Unless you can save tens of thousands for a car, or hundreds of thousands for a house, you’ll most likely have to take a loan at some point in your life. And before you can take a loan, you have to build your credit to become eligible for one. The simplest way to do this is to maintain credit cards, but you have to use them carefully.
Only open rewards credit cards. If you have to use credit cards, you might as well get some perks from them. The ones that offer cash back are the best because you can use them for whatever you need, but others that offer deals on travel or discounts at certain companies are good too. Discover’s It card offers a great cash reward program and accepts newcomers who have no previous credit history.
Never spend more on a credit card than what you have in your bank account. Credit cards are infamous for causing debt, but everything depends on how you use them. You should never spend more on your card than what you can pay off by the end of the month. A common misconception is that if you just pay the minimum fee every month, you’re golden. The truth is, if you leave any amount unpaid, the credit company will charge interest on it. Keeping a balance under 30 percent of your credit limit also improves your credit score.
Use apps to manage your accounts and check them regularly. As you start opening new bank accounts and credit cards, staying on top of payments and maintenance is crucial. Luckily, every credit card and bank has their own app, which makes it easy to keep up with your activity. Enter your payment due dates into your phone’s calendar and set monthly alarms two days before the due dates. Also, Credit Karma is a great app to monitor your credit score and see information about all your accounts in one place.
Shop for the best interest rates on loans. Sometimes it is possible to get a loan with little or no credit history or a low score. Still, the point of building your credit is that when you need to take a loan, you can qualify for the best interest rate possible. For example, if you want to buy a new car, ask both the dealership and your bank what rate they’d offer you on a loan. This is another situation where using a credit union can be beneficial because they often give better rates. Just remember that to check if you’re eligible for a loan or see what rate you can get these companies have to do a hard check on your credit, which isn’t good for your score. Do some research first to narrow your options and check with no more than two places.
Give a down payment when you open a loan. This is where those savings you’ve been building come in handy. Giving a down payment can lower the amount of time until you pay off the loan and reduces the payments. It can also be used as a bargaining chip for loans that allow negotiation, like buying a car.
Talk to customer service. The lingo financial service providers use in their written material tends to be pretty cryptic and difficult to understand, so if you have questions that Google can’t answer, don’t be shy to pick up the phone. Whether it’s account-specific or a general question about a financial topic, your bank or card providers have a paid staff of representatives waiting to help you. You may have to spend some time on hold, but it’s worth talking to someone who can give exact answers. Some companies also offer online chat or appointments in person. Utilize these resources to make sure you understand the terms of your accounts and avoid paying unnecessary fees.
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