Everyone needs financial literacy. In recent years, economic challenges have pushed financial education to the forefront for both individuals and institutions, but at its heart financial literacy is really about understanding your own financial health and being able to make sound financial decisions.
Here are three simple steps you can take to control your finances and boost your financial literacy.
1. Keep a Budget
Budgeting is the first important building block. With a solid budget, you’ll have better control through understanding everything going in and coming out of your accounts.
Begin by adding-up all your sources of income over the year, and then look at your monthly expenses. Don’t forget to factor in how much money you’d like to be saving, as well as money for emergencies.
Your expenses, debt repayment and savings should add up to your monthly income. If your spending is more than your income, explore places where you can cut back to keep your cash flow in line.
There are many apps and digital tools to help you manage your budget — including Travis’ Digital Money Management Tool MyInsight, where you can track your balances and transactions in real-time using the Travis Credit Union mobile app.
If you want to learn more about budgeting, check out our Financial Wellness Hub.
2. Know Your Credit Score
Do you know your credit score? Even if you’re not currently applying for a loan, it’s critical to be aware of your credit score. That way, when you do need to borrow, you don’t end up overpaying in interest. Many credit bureaus will help you monitor and send you alerts when your score fluctuates, so you can better understand the makeup of your score and why it may have changed.
You are entitled to a free report from the three major credit bureaus annually. Check your report three times per year by requesting the report from one credit bureau every four months. Get started at AnnualCreditReport.com. Credit scores range from 300-850, with the majority of Americans scoring between 600-800. For lenders, a higher score means a lower risk of default, usually leading to more favorable borrowing terms.
If your score isn’t where you want it to be, now is the perfect time to boost your number. One of the best things you can do is pay your credit card on time every month. Also, if you have revolving debt, aim to keep your credit utilization ratio below 30% — that is the ratio of amounts owed to your total credit limit.
If you are new to credit and don’t have much history, one option is to open a no-annual-fee credit card and use it toward some of your everyday spending purchases, and then be sure to pay it in full every month.
Learn more about boosting your credit score with Experian Boost™.
3. Set Realistic Financial Goals
With a budget and understanding of your credit score in place, you can start setting some specific and actionable goals. Both short-term and long-term goals are key for staying motivated, ensuring you’ll continue working toward improving your financial well-being.
Be empowered with realistic and time-specific goals. Look at your budget and see what can become a reality with your income and expenses. Maybe that’s reducing your student loans by half in the next year or making a down payment on a home in three years. Whatever it is, base it on your actual budget, and get as specific as possible with the steps to get there.
Starting a specific savings or investment account (depending on your timeframe) for your goal(s) can also be beneficial. This allows you to see the money grow and removing it from your everyday checking or spending account can prevent you from spending it. You can also set up automatic paycheck deductions to your goal account.
Have more questions about your financial literacy? Travis Credit Union is here to help every step of the way. Visit our Financial Wellness Hub for more resources.