If you don’t learn how to manage your money, you’ll lose more than $100 a month, a new study says.
What would you buy with an extra $100 a month? You could revamp your wardrobe, go out for a nice meal, or even better, put it towards your emergency savings. Too bad you’re throwing it away.
A new poll shows that the average adult is losing out on $1,389 a year – or $115 a month – because they don’t know when to save or spend. The National Financial Educators Council (NFEC), a non-profit organization that provides training on financial wellness, reports that Americans lost a total of $280 billion in 2021 due to a lack of financial literacy.
This loss is higher than it was pre-pandemic. In 2019, individuals lost $100 less during the year.
“Unlike other subject matter taught in school, financial literacy requires more than just understanding content,” says Vince Shorb, the NFEC’s executive officer. “It requires learners to be able to adjust their daily financial behaviors and have enough knowledge to make confident financial decisions.”
Below are five ways you can be smarter with your money.
1. Find a budget that works for you and stick to it
First you’ll want to define your income, fixed versus flexible expenses, and your for-fun expenses. Categorize your budget (utilities, insurance, etc.) and set spending limits that are reasonable for your income. When you know the amount of money coming in going out, you can set a plan to save or pay down debt. Any financial goal starts with a budget. Be sure to watch your spending habits and assess your budget regularly.
Find out: 8 Budgeting Mistakes to Avoid
2. Make your savings account a priority
Building up emergency funds can feel intimidating, but it isn’t impossible. To make some extra money, you can sell items in your home that you aren’t actually using – that exercise equipment you bought last New Year could earn you the extra cash that you need. Pause unnecessary spending by brewing your coffee and cooking your dinners at home. Pick up a side hustle like pet sitting, mowing lawns, shoveling snow – there are many things people would rather pay you to do than do themselves.
3. Take advantage of your 401(k)
A 401(k) is a work-sponsored retirement account where you contribute a set amount of your income and the company matches a percentage, which is basically free money. The income you put away doesn’t count as taxable income. Contributing to and understanding how your retirement fund works is a great way to reduce financial stress down the road.
4. Improve your credit score
Your credit score affects your ability to make big purchases and reach milestones like buying a house. Any credit card, auto loan, a mortgage lender will check your credit before lending you money. You can check your free, annual credit report to ensure all the information is correct. Mistakes make it through and a negative account you never opened can be there and drag down your score. Payment history makes up the largest chunk of what makes up your credit score. So make those payments on time and your score will increase over time.
5. Spend less at the grocery store
Grocery prices are going up, but you can keep expenses down. Opt for the generic store brand, it’s usually cheaper than name brands. You can also plan your meals out ahead of time. Limit sporadic grocery store visits – those trips to pick up extra cooking ingredients or snacks add up.
However you do it, saving that extra $100 a month could increase your overall financial health and leave you in a better spot financially by the end of the year.
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Published by Debt.com, LLC