Most of us don’t get any childhood training in personal finance — then we grow up, and all of a sudden we’ve got to juggle bank accounts, loans, credit scores, and so much more. If you’re feeling a bit overwhelmed and clueless, you are far from alone. A recent report from Clever Real Estate found that 46% of Americans admit to feeling insecure about their financial knowledge. Thankfully, it’s never too late to learn some basics to make you better with money.
1. Earn a generous return on your saved cash
Right now is an excellent time to have money saved — but only if you’re earning interest on it. Specifically, a high-yield savings account can help you grow your money, thanks to a higher federal funds rate. The Federal Reserve doesn’t set consumer interest rates, but they trend in the same direction as the Fed rate — and right now, that’s up.
Just 31% of us have a savings account paying more than 4% APY, according to research from The Ascent about savings. If you’re not among us, you’ve got no time to lose! Rates are expected to fall in 2024. Have a look at our list of the best high-yield savings accounts, and pick out a winner.
2. Stay on top of your cash flow and debts
Do you know how much money is in your checking account? How about the figure you owe on credit cards, a car loan, or any other debt? The surest way to financial empowerment is facing those numbers head-on, and if they’re not where you want them to be, making a change for the better (such as by increasing your income or creating a debt payoff plan).
Log in to your checking account regularly so you’ll know if your bills have been debited out of your account and whether you’re at risk of overdraft. Do the same for your credit cards, as you’ll be able to make sure you can pay off the balances before interest comes due (more about credit card interest below). If you’ve got loans with fixed pay-off dates, keep track of them — if only so you know how far away you are from celebrating paying them off.
3. Know your credit score
Your credit score is an important cornerstone of your personal finances — do you know what yours is? While it’s not necessary to know that exact number (especially since you have multiple credit scores — there are multiple credit bureaus and scoring models), it’s a good idea to know your range, at least.
Your credit score has a major impact on the interest rate you’ll pay if you need to borrow money, and with a higher score, you’ll likely qualify for better credit cards, better terms on loans, and even cheaper car insurance.
Luckily, it’s pretty easy to keep track of your credit score. I recommend targeting your FICO® Score in particular; 90% of lenders use it. Some credit cards and banks offer free access to it — this is an underrated credit card perk for sure. See if your existing financial relationships offer FICO® Score access — one of the companies you work with might.
4. Use credit cards the right way
Credit cards are a useful financial tool, but they can also be dangerous if you’re not careful. It’s best to pay off your credit card balances in full every month to avoid mounting interest charges and the potential for credit score damage. The exception to this is if you’re using a card with a 0% APR intro offer to finance a large purchase over time — and if so, don’t count on the card’s minimum payments to pay off your balance before interest accrues. Run the math yourself to ensure you’re paying enough to be free and clear by then.
If you’ve got some credit card debt, it’s best to get clear of it ASAP — credit card interest rates are high (averaging more than 20%) and variable, which means they can climb over time. I recommend snowballing your debt payoff. And if you can increase your income via a side hustle, it’ll be much easier to get rid of debt.
5. Manage your tax situation
While no one really enjoys paying taxes, most of us will at least acknowledge that paying our fair share in taxes helps our fellow Americans. That said, there’s no reason to pay more than you have to. The good news is that there are a few ways to plan for taxes and get ahead of a big bill from the IRS. Contrary to popular belief, getting a tax refund is something you shouldn’t want — because it means you overpaid your taxes and gave the government an interest-free loan.
The best tax software can make it easier to manage your taxes, or you might want to work with a tax professional. And you can reduce your taxable income in myriad ways, including by saving money for medical care in a health savings account or investing via a tax-advantaged retirement account, like an IRA or 401(k).
It’s easy to assume that everyone else knows so much more about managing money than you do, but don’t worry — most of them are just really good at faking it. Thanks to having read this article, you now have a list of skills that you can acquire and improve over time — and get better with money, for real.
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