About the author: Lamar Watson, CFP®, is a Fee-Only Financial Advisor in the Washington, D.C. area that works with clients virtually across the country. Lamar's work with his clients focuses on budgeting, employee benefits, paying down debt, buying their first home, and investing. Lamar is the Founder of Dream Financial Planning, a virtual Fiduciary Financial Planning firm specifically designed to help young professionals and minorities take control of their finances and fulfill their dreams. Feel free to schedule a complimentary consultation to learn how we use the DREAM Financial Planning Process ™ to help our clients achieve their goals.
Did you know that April is Financial Literacy Month? Financial Literacy Month is a national campaign designed to bring more financial education to children and adults. Whether you're a financial wiz or just learning the ropes, so many ways exist to improve your financial literacy. Here are four to get you started.
Make a Monthly Budget
One of the most important steps in ensuring financial success is creating a monthly budget. This may sound simple, but a budget is your financial strategy's foundation.
Creating a monthly budget doesn't have to be complicated. Here's how to ensure you're setting yourself up for financial success:
- First, calculate your gross monthly income. This could include your salary, investment income, Social Security, child support/alimony, freelance work, or other income sources. Remember to calculate your net income as well, which is how much is left after taxes and other deductions.
- Speaking of priorities, consider your financial priorities and allocate your budget accordingly. In addition to your regular monthly expenses, you might decide to increase your general savings or earmark money toward a large purchase such as a home or car. The important point is to decide what's important and to make sure your budget reflects those values.
- Finally, create expense categories for where your money is spent and track each and every expense. It's important to differentiate between wants and needs. You need to pay the rent or mortgage payment, but you want a new pair of shoes or a nice dinner out. By tracking your spending, you can determine whether your budget is aligned with your priorities or if you should make adjustments to meet your goals.
Check Your Credit Score
If it's been a while since you checked your credit score, now is a great time to see where you stand. Your credit score is an important metric when considering your financial health and will play a larger role when you apply for loans, especially mortgages and car loans. If you have a higher credit score, you may qualify for lower-interest debt, which will save you money.
Reviewing your credit report is important to ensure there aren't any mistakes or incorrect accounts assigned to you. If you notice something on your credit report that doesn't look accurate, such as a loan or credit card you don't remember opening, contact your financial institutions immediately. You can also file a dispute with the credit reporting agencies to report any false information you find.
Understand Your Investment Options
As you become more financially literate and feel comfortable talking about finances, you may consider looking into investments that are aligned with your goals. There are so many different types of investments and working with a financial advisor can help you understand your options. You should also educate yourself on some of the most common investment types, including:
Don’t Be Afraid to Ask Questions
Talking about finances can be intimidating, but we all must start somewhere. This Financial Literacy Month, make it a goal to learn one or two new facts about finance and contact an expert who can help. You can turn to financial advisors and financial publications to get your questions answered without feeling naive or silly. There's no such thing as a dumb question when it comes to becoming more financially literate and secure.
Financial literacy doesn't come from making big leaps but rather from taking one step at a time. Pick one of the options above and start yourself on the path to becoming financially savvy.
Dream Financial Planning Process ™
Whether you're managing student loan debt, starting a family, or considering buying your first home, the DREAM Financial Planning Process™ is tailored to the unique needs of busy professionals in their 30s and 40s. This process focuses more on short-term goals while you grow and evolve in your personal and professional life. So if you're looking for guidance on Financial Planning, optimizing employee benefits, budgeting, student loans, and managing your 401k or investments, we can help.
With uncertainty surrounding the economic stability of our country, it's okay to have fears and anxieties surrounding your own savings and investments. The most productive course of action from here is to reach out to Dream Financial Planning (or whoever your trusted advisor might be) and discuss your options. It's easy to have knee-jerk reactions when it feels like the bottom is falling out, but it is imperative to make decisions using research-backed data and a level head. If you'd like a Complimentary Review and risk assessment of your investment portfolio, feel free to send me an e-mail.
In the January Newsletter, there's a chart that shows you how often you should expect a market correction. I discuss how a Financial Advisor can help you avoid emotional decision-making with U.S. News and World Report and how to know if your Financial Advisor is the right fit for you. There's also a blog post where I share a PDF checklist, What Issues Should I Consider At The Start Of The Year 2022, to help guide you for the rest of the year. If you find any of this information helpful, feel free to sign up to receive future newsletters via e-mail.
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