For much of the country, basic financial education has long been absent from the classroom (though that is changing). As a result, half of us don’t feel confident about our personal finance knowledge, or as I call it “money knowledge.” While it can feel discouraging, you have the power to change this!
The key is making it a priority to get smarter about money. Once you do that, you can use my tips below to map out a simple path to a better financial future. Don’t be afraid to embrace technology and consider finding an accountability buddy to keep you motivated and make learning more fun. Remember, so many of us are in the same boat!
Ally Consumer Research conducted a survey to gauge Americans’ money knowledge, and the findings were somewhat sobering. Consumers generally fell into two camps, those that grasped key financial concepts like earning interest and the impact of inflation, and those who didn’t.
As you might guess, those that understood these concepts also reported higher levels of financial well-being – meaning they had higher credit scores, spending was below income, they were current on debt payments, could cover a $1,000 emergency without going into debt, and were saving for retirement. Those who didn’t understand interest and inflation seemed to be in worse financial shape.
The survey also found that older individuals are more confident about their money situation while millennials and Gen Z are in relatively worse condition. To be fair, older generations have benefited from more time and experience as they’ve lived through increasing earnings and more complex financial situations. On the other hand, while younger generations have less experience now, they have the benefit of significant time ahead to keep learning.
Quick Tips to Get Your Money Life on Track
Perhaps you too feel uneasy about your personal financial situation—you are not alone! So many people struggle with paying down debt, building emergency savings, and investing for retirement (all while keeping up with day-to-day obligations). Don’t worry, we’ve got your back.
Our goal is to help make you savvier with your money and provide the tools needed to build solid financial habits. Here are four things you can start working on right now:
1. Create a budget.
It might seem daunting to track all of your income and spending but gone are the days of needing to be a spreadsheet wizard in order to know your cash inflows and outflows. There are easy-to-use apps and online tools out there designed to make it quick and painless. (We have one here!) Once you get in the flow of seeing where your money goes, you’ll have more confidence to determine what expenses you can cut out and maybe even discover ways you can boost your income.
Here’s a tip: Set realistic goals for yourself. For example, don’t try to overhaul your budget in a week. Rather, make it a goal to save $X by the end of the year. It’s all about taking baby steps – that will lead to good long-term habits. Habits like microsaving can help you get there.
2. Automate your saving & investing.
Perhaps the single best solution to getting organized with your money is to make it an afterthought. Imagine never missing a bill or paying a late fee. You can do it by establishing recurring payments from your checking account and auto-pay features with a credit or debit card. Reducing debt is made easier with periodic payments as well. Finally, you can use the automation hack with your investments too.
Once your high-interest debt has dwindled, you can focus on having your money work for you, by investing. Monthly IRA or 401(k) contributions from your savings account or directly from your paycheck can be a seamless way to build a portfolio. Automating your finances makes life easier by not having to worry about taking extra time to frequently log-in to accounts.
3. Self-educate one step at a time.
Don’t wait for someone else to force you to learn about making smarter financial decisions. Grab the bull by the horns and own your future!
Here’s what you can do starting today: Pick one topic a month that you want to know more about that will also improve your financial life. It could be buying a home, saving for college, or how to become debt-free. Then find credible sources online or in your community to learn these skills. Just do one topic at a time. Before you know it, like a snowball, your money knowledge stack will get bigger and bigger.
4. Reward yourself.
What’s hard work without celebrating milestones? Have fun by giving yourself small rewards along the way. Think of it as paying yourself a dividend (keeping the financial theme in mind!). When you hit that short-term savings number or after you have learned a new personal finance topic, a little splurge is deserved!
The Bottom Line
Many people struggle with their money. It’s hard keeping up with daily expenses while prioritizing saving for your future. High inflation rates make it even more challenging for many families in America right now. The good news is those with the least amount of financial knowledge have the most upside potential: millennials and Gen Z have decades ahead to learn, save and invest. Younger people can also take advantage of their tech-savviness by using today’s online tools and budgeting apps. Small habits established today, while learning about money one topic at a time, set the foundation for a bright financial future. The future you will thank you.
Lindsey Bell, Ally’s chief markets & money strategist, is an award-winning investment professional with a passion for personal finance and more than 17 years of Wall Street experience. Bell’s unique ability to connect the dots between data and real life and craft bite-sized money ideas that people can use and apply stems from her deep background as an analyst, researcher and portfolio manager at organizations including J.P. Morgan and Deutsche Bank. She is known for demonstrating why and how an understanding of all things money improves a person’s finances and overall well-being. An ongoing CNBC contributor, Bell empowers consumers and investors across all walks of life and frequently shares her insights with the Wall Street Journal, Barron’s, Kiplinger’s, Forbes and Business Insider. She also serves on the board of Better Investing, a non-profit focused on investment education.