Whether you’re just starting on your financial journey or revisiting the basics, refreshing your financial knowledge can lead to smarter decisions. Here are five practical ways to boost your financial literacy and make informed choices.
1. Reassess Your Budgeting Skills
Budgeting forms the backbone of sound financial management. It’s not just about tracking your income and expenses—it’s about understanding your spending patterns and aligning them with your financial goals. If it’s been a while since you’ve evaluated your budget, now might be the time to revisit it.
Start by reviewing your current income, necessary expenses, and discretionary spending. Identify areas where you might be overspending or underestimating costs. You could also consider leveraging budgeting apps that provide real-time updates and allow you to set financial goals. While this won’t guarantee financial success, staying on top of your budget can help you make more informed financial choices.
Additionally, consider the 50/30/20 rule, which suggests allocating 50% of your income to needs, 30% to wants, and 20% to savings or debt repayment.1 This method can offer a simple yet effective way to organize your finances and build a clearer picture of where your money goes.
2. Refresh Your Understanding of Credit Scores
Your credit score impacts many aspects of your financial life—from qualifying for loans to securing favorable interest rates. Many people don’t check their credit scores regularly, but it’s worth doing to ensure that you’re on track. Even if you feel confident in your score, refreshing your knowledge about what affects it can be enlightening.
Factors like payment history, the amount of debt, length of credit history, and the types of credit in use can all impact your score. For instance, keeping your credit utilization ratio (the percentage of credit you’re using compared to your credit limit) below 30% is often recommended, but this percentage might vary depending on individual circumstances. Remember, understanding how your score is calculated and how it fluctuates can empower you to take more calculated financial steps.
If you’re unsure where to start, many financial institutions offer free credit score checks. These services allow you to monitor any changes and receive tips on improving your score over time. While no method guarantees an instant improvement, regularly checking your score can prevent unpleasant surprises when applying for credit.
3. Dive Deeper Into Investment Basics
Investing can seem intimidating, but you don’t need to be a stock market expert to make informed decisions. A key part of refreshing your financial literacy is understanding how to grow your wealth through investments, even on a small scale.
Start by researching the basics of different investment vehicles—such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Each type carries its own level of risk and potential return, so it’s crucial to evaluate what fits your financial situation and risk tolerance. While diversification is often cited as a way to reduce risk, there’s no universal strategy that fits everyone. It’s also worth remembering that all investments carry some risk, so it’s important to be comfortable with potential losses before committing.2
Many people also find value in dollar-cost averaging, a strategy that involves investing a fixed amount of money at regular intervals, regardless of market conditions. This approach can help spread out risk, although results may vary based on market performance. No investment strategy is foolproof, but increasing your knowledge of investment options and practices may help you make smarter, more confident decisions.
4. Explore Financial Podcasts, Books, and Courses
One of the best ways to stay informed and motivated in your financial journey is by immersing yourself in educational content. Financial literacy resources have evolved significantly, and today there are countless podcasts, books, and online courses designed to simplify complex financial topics.
For podcasts, consider shows that cover a range of financial issues, such as personal finance, investing, and entrepreneurship. These podcasts often provide real-world examples and expert advice that can deepen your understanding. Similarly, books like Rich Dad Poor Dad by Robert Kiyosaki or The Total Money Makeover by Dave Ramsey may offer perspectives on building wealth and managing finances effectively, though keep in mind that individual results vary.
Online courses, many of which are free or low-cost, can also be a great way to gain structured financial education. Websites like Coursera, Udemy, and Khan Academy offer beginner-to-advanced courses on budgeting, investing, and financial planning. Remember, no single resource can solve every financial issue, but exploring a variety of media might broaden your financial understanding and keep you engaged.
5. Review Your Retirement Plan
Retirement might seem far off, but it’s never too early or late to review your plans for the future. While many people contribute to 401(k)s or IRAs, it’s important to periodically evaluate your contributions and expected retirement income.3 This is particularly crucial given changing life circumstances, such as job changes or income fluctuations.
When reviewing your retirement plan, check whether you’re taking full advantage of employer contributions, if available. For those self-employed or without access to employer-sponsored plans, options like Roth IRAs may be worth exploring. Also, periodically revisiting your asset allocation based on your age, risk tolerance, and time until retirement could help keep your investments aligned with your goals.
Keep in mind that while planning for retirement is vital, no strategy guarantees a certain outcome. That said, consistently reviewing your plans can help you identify any gaps or opportunities to strengthen your future financial security.
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Refreshing your financial literacy doesn’t have to be a daunting task. By reassessing your budget, keeping track of your credit score, diving into investment basics, exploring educational resources, and reviewing your retirement plan, you can gain valuable insights into your financial situation.
Although results may vary depending on individual circumstances, these steps can help guide you toward making more informed financial decisions that align with your goals. While personal finance is unique to everyone, maintaining a solid understanding of key financial concepts can make a world of difference in achieving long-term success.
