April is Financial Literacy Month, and the perfect time to learn more about personal finances – and utilize best practices moving forward. Financial literacy can have a significant impact on a person’s present and future financial situation.
Personal finance includes budgeting, saving, and spending. Like individuals, every budget looks different, but there are a few ground rules. Start by keeping track of your income and expenses. This task might seem daunting initially, but tools like an online spending and budgeting tracker can help track your spending and set future goals, like saving money for emergencies or paying off debt – which can be another challenge to understand.
Understanding debt is crucial to becoming more financially literate. There are different kinds of debt, such as a mortgage on a home, which make sense to have in the long run, or credit card debt. Credit card debt is more short-term and should be paid as quickly as possible to avoid additional interest fees. By paying more than the monthly minimum owed, you’re reducing the amount of interest you’ll pay long-term, freeing money to spend on things you enjoy or save for the future.
Today, April 15, also marks Tax Day. If you have received your refund or will soon, here are some strategies to consider:
- Invest your refund into a traditional or Roth IRA.
- Treat yourself – while it’s important to be mindful of how to spend your tax refund, you can also consider investing a portion of your refund towards projects and plans that will nourish your mind and body.
- Put your refund toward starting or adding to an emergency fund.
- Lastly, utilize your resources. Financial advisors can help you understand financial literacy further. Advisors provide recommendations and solutions for your current financial situation and help you make decisions to reach financial success. There are also a variety of financial literacy resources online that can provide tips when questions arise.
Implementing these best practices into your daily routine helps set yourself up for a successful future, making your financial goals much more attainable.
(Heidi Parkhurst is senior resident director at Merrill Lynch Wealth Management, Davenport, and president of Bank of America Iowa.)
