April is National Financial Literacy Month. Jeffrey Corliss, Executive Director of RDM Financial Group at High Tower, shares his tips on good saving and spending habits.
Growing up people do not always receive enough financial education. You are often on your own unless you take classes or if you had a parent that taught you about finances.
There are many resources to learn about finances online as well as adult education classes, that can give you a head start on organizing and monitoring your finances.
Analyze the need vs. the want:
People often use credit cards to pay for purchases and at the end of the month they are surprised at how much those charges add up. An eye-opening exercise is to try to go one week by only paying cash. This really gets people to focus on “Do I really need that shirt?” We have become consumers who always want the newest and latest product. People really need to think about their finances before charging and building up their credit card debt. It is very hard to pay off.
Set your priorities:
Everyone has a finite amount of income coming in. After you figure out the difference between a need and a want, you should prioritize where you spend your money. For example, paying off debts, saving for down payment for a home, or putting away money for your children’s education or your retirement.
The concept of savings vs investing:
People should think of savings as money needed in the next year or two. People should put aside money in a savings account for any short-term need as an emergency fund. For example, your car needs repairs of $1,000, you don’t want to have to put this on a credit card if you cannot pay it off. Also, you want to have savings in case you lose your job. Investing should be for longer term money that you don’t anticipate needing for a few years or longer.
Start saving money early:
It can be very difficult for people starting their careers to set aside money, since they may have student debt or other obligations. Try to pay off debts first by looking at the debt with the highest interest rate. People should start slowly and split their savings into an emergency fund account and then also put some in their retirement account at work or an Individual Retirement Account.