Being financially aware is key to your long-term success. It’s important to understand how to manage your finances to build wealth over time. There are many factors that contribute to your overall financial health, and it’s important to look at the big picture in order to ensure your finances are in good order. There’s no better time than today, National Financial Awareness Day, to focus on this topic – so let’s dive right in!
Components of Financial Awareness
Money is essential, but it’s what you do with that money that has the biggest impact on your financial future. It’s important to have a plan for the money that flows in and out of your bank account, so you can begin building wealth. You should consult with a financial planning professional to help analyze your individual needs, but below we’ll outline some key highlights to consider.
Improving Your Credit Score
Many types of purchases require you to have a qualifying credit score. If you have not established credit or if your credit needs improvement, you may find it challenging to get approved for things like a mortgage, an auto loan, a rental home or apartment, a personal loan, credit cards and more. In other words, having a decent credit score is essential for your day to day life. So, what do you do if your credit score needs some work?
● No Credit: Apply for a secured credit card and make on-time payments or become an authorized user on someone else’s credit card.
● Challenging Credit: Pay your bills on time, work on reducing your revolving debt, don’t apply for too many credit cards, and don’t close old accounts – the longer your credit history, the better!
Learning to Budget
It’s important to know where your money is going, and there’s no better way to do that than by following a budget. Budgeting allows you to see how you spend your money each month and can help you pinpoint areas where you could cut back and save more of your income or use the surplus to pay down debt. There are a number of free or inexpensive budgeting programs and apps that guide you through the process, so you don’t have to go at it alone.
You should aim to have more assets than liabilities. Your assets can include things like your bank account balance, home, investments, business and many more. If you manage your money strategically, your assets should continue to grow over time. Liabilities, on the other hand, are the total debts you owe. You’ll want to keep this number low and ideally, pay off your debt entirely.
Planning Large Purchases
It’s always a good idea to carefully think through a big purchase before going through with it. Whether it’s a car, a piece of furniture, a vacation or even a new home, make sure it’s a smart financial move for your situation. Try to plan the purchase well in advance so you can start saving. Make sure you can afford it, whether you’re paying in full or installments. If you’re buying a home, try to save what you can for your down payment and ensure you can comfortably afford the monthly mortgage payments. Bottom line, you don’t want to overextend yourself financially.
Preparing for Retirement
It’s never too early to begin thinking about retirement, even if you’ve just started your career. Understanding your retirement plan options and any contribution matches made by your employer are very important in order to maximize your retirement savings. If you don’t have access to an employer-sponsored retirement plan, you may want to set up an IRA to make your own retirement contributions.
Having a solid plan for your finances can ease your mind and allow you to be prepared for anything life throws your way, and a financial advisor is a great resource to help you get started. C&F’s Wealth Management division is focused on helping you with your wealth management goals – learn more about how our Wealth Management team can help you achieve long-term financial success.