Five Things Everyone Should Know About Money
Have you ever felt intimidated by managing your finances? With so many different options, strategies, and potential pitfalls, it can be hard to know where to start.
Knowledge is power, and understanding a few money basics can help build your financial stability.
United Way of Southeast Louisiana’s financial capability services, offered through our Prosperity Centers in New Orleans and Covington, empower participants to understand their financial position, identify obstacles to their financial success, and establish a plan to achieve their financial goals.
Tiffany Scott, one of our expert Financial Capability Specialists who guides Prosperity Center clients through this process, shared these five money management tips in honor of Financial Literacy Month.
#1: Create a spending plan
A spending plan is the first step toward financial freedom. A also called a budget, a spending plan helps you track income (money coming in) from expenses (money going out). In addition, a good spending plan can help you identify any over-spending habits and keep track of bills. As a rule of thumb, your spending plan is a reference guide that should be updated each pay period or month as your expenses change. Start by downloading a budgeting app on your cell phone or writing in a financial planning book.
#2: Pay yourself first
Save first and pay your bills after. This thought may sound crazy, especially if it seems like there’s no money left over after your bills are paid, but you should treat savings as an expense just like your bills. Savings allow you to prepare for unexpected expenses such as new tires or medicals bills. Start by asking your human resources department to deduct a portion of your wages during payroll or set up automatic withdrawals to a savings account.
#3: Manage debt
The best way to deal with debt is to not deny it. The snowball method is a good strategy to tackle debt one step at a time.
• Start by placing your debt in order from highest to lowest interest.
• Then, write out the minimum payments for each. Pay the minimum balances for each except the debt with the highest interest.
• Pay the minimum payment plus extra for the highest interest debt.
• Once you pay off the highest interest debt, use that minimum payment as an extra payment toward the next highest debt until all debt balances are zero.
• And during this time, try not to borrow any additional debt.
#4: Build or fix your credit
To build credit, consider borrowing a secured loan. A secured loan is protected by collateral like a house or car. If you are unable to make payments, your collateral will be used as repayment. With this in mind, it is important only to borrow what you can pay back.
To fix credit, look through your credit report and identify any negative accounts/derogatory marks. Then, focus on the most important factors that influence your credit: on-time payments (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).
#5: Increase your income
Do you have a favorite hobby you can turn into a side hustle? More than one source of income can help you reduce debt, build savings, and provide financial security. Turn your passion into a paycheck!
In Southeast Louisiana, over half of households live in poverty or struggle to afford the basics. There is an urgent need to arm families with the tools, skills, and opportunities they need to become financially stable.
United, we can create pathways to prosperity for everyone. Join us.