The new school year is almost here, and for the first time, incoming high school students will be required by state law to take a financial literacy class to graduate. And Florida isn’t alone. Just last month, Connecticut became the 22nd state to enact personal financial curriculum as a perquisite for high school graduation. Embracing financial education is the key to unlocking doors of opportunity and financial freedom.
But students aren’t the only ones who can use a little education on money matters. Financial literacy empowers us to make informed decisions, save for the future and achieve our financial goals. Studies reveal that individuals with higher financial literacy levels tend to make better financial decisions, leading to greater financial security and improved overall well-being.
To highlight financial literacy awareness, we have compiled some basic suggestions to set you on the path of financial success.
Create a budget and stick to it. Start by listing your sources of income and all your expenses. Allocate money for essentials like rent, groceries and bills. Then, set aside funds for savings and discretionary spending, like entertainment and dining out. To help with budgeting, some follow the 50/30/20 rule. Divide your take-home income into suggested spending in three categories: 50% of net pay for needs, 30% for wants and 20% for savings and debt repayment. Others follow the 40/30/20/10 rule — 40% of income should go towards necessities, 30% should go towards discretionary spending, 20% should go towards savings or paying off debt and 10% should go towards charitable giving or other financial goals.
Eliminate high-interest debt. A significant amount of people feel overwhelmed by their debts. Pay off high-interest debts like credit cards as quickly as possible. High-interest debt can drain your finances and make it challenging to save.
Understand credit. Learn about credit scores, how they are calculated and their impact on your financial life. Maintaining a good credit score can lead to better loan terms and financial opportunities. A higher credit score can save a lot of money over a person’s lifetime.
Save regularly. A staggering number of individuals don’t have enough savings to cover unexpected emergencies. Building a savings habit is essential for financial security. Aim to save a portion of your income regularly, even if it’s a small amount. It may seem difficult, but as the Nike slogan goes: “Just Do It.” Saving money now gives you the chance to buy a nice home, start a business or follow your dreams.
Understand income taxes. It isn’t what you make, it is what you keep after income taxes. Find a good accountant. Take advantage of tax deductions and tax credits available in the Internal Revenue Code.
Understand basic contract law. Many financial obligations over your lifetime will be spelled out in a contract.
Plan for retirement. Many people are unprepared for retirement, leaving them facing financial challenges in their golden years. It’s never too early to start saving for retirement. Contribute to retirement accounts and take advantage of employer-matched contributions if available.
Find a mentor for financial literacy. Seek out someone who can teach you some of the skills you need. Learn about their experiences in managing money and from their mistakes. It is never too late to learn and the more informed you are, the better your chances of creating a strong financial future.
Balance your checkbook. A significant portion of people find balancing a checkbook challenging. While balancing a checkbook is a valuable skill, there are user-friendly budgeting apps and tools available that make managing your money easy. Embrace technology to ease your financial journey.
Protect yourself. Ensure you have appropriate insurance coverage, such as health, auto and home insurance, to safeguard against unexpected expenses.
By following some of these basic financial literacy suggestions, you can build a strong foundation for a successful financial future.
Melisse G. Burstein and Stuart Rohatiner are partners with Gerson, Preston, Klein, Lips, Eisenberg & Gelber, PA. They have conducted hundreds of financial literacy classes for high school students, lawyers, women, athletes and entrepreneurs.
