Understanding Financial Literacy
What is Personal Finance?
Personal finances, or financial literacy, is the management of your money to include all sources of income, savings, spending, investments, and more. Understanding your personal finances will help you to manage your money so you can live the lifestyle you want, now and in the future.
Personal Finance Tips
Reduce and Manage Debt
Look at the debts you have and prioritize and eliminate those with unfavorable terms. You can approach this in a couple of different ways, but both require you to list your debts and make minimum payments on all of them while having a prioritized focus on one. When that debt is paid off, you’ll target the next one until you have paid down all of them.
Avalanche Method
Prioritize interest rates and pay off debt with the highest one first, then move on to the next once it's paid off. You'll pay less interest over time.
Snowball Method
Prioritize balances and pay off the smallest debt first, then move on to the next biggest balance. You'll build motivation by eliminating debts faster.
Build an Emergency Fund
Save at least six to eight months of living expenses for an emergency fund. This can help cover unexpected expenses like car repairs, medical bills, or job loss and will also provide a sense of security, knowing you're prepared.
Savings Accounts
Open a high-yield savings account to help your emergency fund grow faster.
Keep it Separated
Keep your emergency fund separate from other accounts to avoid spending it.
Automatic Transfers
Set up automatic transfers from each paycheck to build your emergency fund.
Understanding Wants vs Needs
Needs generally include food, clothing, shelter, health care, reliable transportation, and minimum debt payments. Everything else is likely a want. While it’s okay to spend on wants, don’t sacrifice financial security to fulfill them.
But what about saving or paying off debt? They can feel like a want because they don’t go toward an immediate need. For example, you can survive this month if you don’t put money in your emergency fund or paying more on a debt. However, saving and getting out of debt should be considered needs because they are investments in your long-term financial and personal well-being.
Create a Budget
This happens to be the one step that makes every other financial goal reachable and is essential for effectively managing your finances. The whole purpose is to let you see where everything is going and make some tweaks if you’re not currently on course to meet your goals.
Download this assessment sheet to help you see what your current financial situation looks like. Try this popular 50/30/20 rule to help you get started creating a budget.
Additional Resources
Redstone Checking Accounts
Choose from three accounts that are packed with convenient tools to help you manage your finances anytime, anywhere.
Redstone Savings Accounts
Whether you’re building a rainy day fund, chasing a goal, or want your money to earn more, there’s an account that fits your style.
The Basics of Investing
Investing may seem complex, but starting with the basics, staying informed, and remaining patient is key.