April is Financial Literacy Month, so to highlight the importance of personal financial knowledge, I have gone to the experts for their best money advice. Financial literacy doesn’t have to be confusing or complicated. Anyone is capable of getting a handle on their financial situation—with the right tools and information.
To start out with, here is my recommendation:
Understand the Time Value of Money
Save. Start saving early… the earlier the better.
Whenever you receive money, whether it be your salary, a commission, bonus, or gift, save a portion of it. If you can start saving in your twenties, you will be much further ahead by the time you reach retirement than the person who started saving in their thirties… or forties.
This is called the time value of money. What it means is that the longer you have money saved away, the more time it will be able to earn interest. Each year that your money is earning interest, the account if growing and new interest is then earned on the new higher principle balance. This compounding effect is the reason that the person who starts a retirement account in their twenties will end up with a much bigger nest egg than the person who starts saving for retirement in their forties.
The Importance of Saving Now
Rachel Fox, teen actress turned financial expert, and creator of Fox on Stocks, has some good advice for millennials: “Save more money now to pay your future self.”
Live Within (or Below) Your Means
Rich Goodall, of Cash Savvy Tips, says “When it comes to budgeting, the trick is to aim BELOW your means, not just within it. That way there will always be money left by the end of the month and will soon turn into savings.”
Find Your Financial Balance
Heather Shue, of Simply Save, a blog dedicated to saving money and simplifying life, advises on retirement: “A long life with retirement is not a guarantee. Personal finance is all about finding a balance between planning for the future and enjoying the present.”
Invest in Quality
Hannah McKnight Rinaldi, frugal living blogger and author of Eat, Drink, and Save Money reminds us to spend money wisely, “Don’t get caught up with spending money on trends. Invest in good quality items that you love that will last a long time.”
Create a Plan to Get Debt-Free
Jamie Jeffers, of Medium Sized Family, talks about how to reach financial freedom: “If you’re in debt, it’s time to make a serious plan to pay it off. The longer you wait, the more it will hold you back. Get mad, make a plan, and attack it! There’s freedom waiting on the other side.”
The Power of Payments Early and Often
Erin Elizabeth Beaupre, the Stay at Home Yogi, addresses the importance of getting out of debt and cutting down the effects of compounding interest, particularly regarding student loans (although this is good advice for ANY loan): “If you have student loans – pay them EARLY and OFTEN. Don’t wait to start paying them down “just because” – the sooner you start, the sooner you will be out of debt! Throw extra money at them any chance you get. It all adds up!”
Diversify Your Income
Travis Scott, financial expert and creator of Stuff Parents Like, explains the importance of multiple income streams. “We all hear you should diversify you investments, but I think the most important thing to diversify is your income. There is a reason the average millionaire has seven sources of income. Today it is easier to diversify your income than any other time in history.”
If you are just getting started, the first thing you need to do is put together your personal budget. This will give you an idea of what money you have coming in and what you are spending it on as it goes out.
- Create a budget—look at monthly income and expenses for your household. Figure out how much disposable income you have (the money that is left over after paying all your bills each month). This is the starting point, because you must know where you are if you are going to figure out how you will reach your financial goals. Click on the image below, or on this link, to download your FREE Money Savvy Living Family Budget: