Personal finance impacts everyone. Whether you're paying bills, creating a budget, or finding ways to save more money, you will likely be faced with money management at one point or another. That's why financial education is so important. Here are some of the top 5 financial education tips to know in 2021.
1. If You Don't Tell Your Money Where to Go, It Will Just Go
You may have had the experience of opening your bank account and wondering why your balance is so low. It's incredibly common to not know where your money is going and feel like it's disappearing into thin air.
Every dollar needs to serve a purpose. And a great way to give money a purpose is by creating a budget. You may decide on a zero-based budget at the beginning of the month, or the 50/30/20 budget that encourages you to spend accordingly on needs, wants, and savings.
There are plenty of budgets out there, and it may not matter which one you choose. What matters is that you're tracking your money and have more control over what you're spending it on each month.
2. Start Saving Today
Saving money is what enables you to break free from a paycheck-to-paycheck lifestyle. Whether you started saving and investing young or if you're just hopping into the savings game now, it's never too late to start.
You can begin with small deposits into a savings account or work on building your first emergency fund. As long as you're setting aside some money each week or month, your future self will be grateful.
3. Consider Paying Yourself First
Paying yourself comes in many forms. It might be putting money aside in retirement accounts, building up an emergency fund, or saving for a big trip. Whatever it looks like for you, make sure that you realize your worth and pay yourself first.
As with money disappearing without a budget, if you wait until the end of the month to pay yourself, it might not happen. That's why it can be beneficial to set up automatic transfers on your payday to make paying yourself simple.
4. Automation Makes Life Easy
Automation is your best friend when it comes to saving, paying off debt, and investing. You can set up automatic transfers to do everything from paying your bills on time to moving extra funds from your checking account to the emergency fund. This will allow you to save money without thinking about it. And the less you have to think about financial management, the easier it can be.
5. Be Smart About Debt
Being smart about the types of debt you take on can make all the difference. Taking out an affordable mortgage on a home is a good kind of debt, since you're using it to build equity and set yourself up to own your home free and clear in the future.
Taking out personal loans or credit cards to spend more on non-essential purchases can be viewed as bad debt. Using debt to support spending habits isn't moving you further along your path to financial freedom, so you should avoid taking on negative debt if you can.
The Bottom Line
Financial knowledge is powerful, and even more so when you put it to good use. These financial education tips can be very valuable if you find ways to incorporate them into your daily financial life. As you use these tips to build a stronger money foundation, you'll begin to see your financial security improve.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.
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Original Source: 5 Financial Education Tips for 2021
