-: In part one of our financial literacy series,
we focused on building positive monetary habits
from the student perspective.
Now, let's look at some more steps to consider
as you start your new job.
Putting a system in place to manage your money
will literally pay off in the end
because compounding your financial education
means compounding your interest.
(upbeat music)
Step one. Financial planning.
This can be a stressful task at first,
but you should get familiar
with your financial strengths and weaknesses
by tracking your cash flow in order to analyze
any budgetary changes that need to be made.
For example, if you find your monthly payments
for credit cards are going towards high interest rates,
instead of the principal,
it may be time to consolidate your debt
for a lower interest rate and faster payoff.
A common ratio use to manage budgeting and saving
is called the 50-30-20 rule,
which allots 50% towards your needs,
30% towards your wants
and 20% towards your savings.
Step two. Set your goals and timelines.
When you organize your immediate near and longterm goals,
it gives you a sense of purpose and acts as motivation
that is needed to stay vigilant and to protect
all that you work for by anticipating any emergencies.
For example, you should contemplate items
such as upcoming vacations you'd like to take,
or when you would like to buy a house,
so that there is a clear approach.
Step three. Retirement,
Regardless of where you work or what age you are,
it is imperative to start a retirement account
as soon as you start to earn wages.
If your employer offers a 401k
or a simple IRA, don't hesitate.
Take advantage as soon as you're eligible.
Not all plans are created equal, so do your research.
Two key things to explore include:
the length of time before you can enroll
in your company's 401k or IRA plan,
taking full advantage of any matching contribution
from your company.
Failing to do so means turning down free money.
Step four. Investing.
Some of the most common investment accounts
include a 401k, a traditional IRA, and a Roth IRA.
Others include a 529 Plan,
if you have a child and wanna start
their K through 12 and college funds sooner than later.
Then, there are investments based on health care assistance,
like a health savings account provided through employers
or a flexible spending account
that can be obtained through employers or individually.
The main phrase to take with you
is personal investment strategy.
To get started, explore every type of investment you can
from stocks, bonds, mutual funds,
and annuities to cryptocurrencies.
Eventually, you will learn about how investing works.
This will define your style and methods
as you assess the levels of risk
and reward in each investment
to confidently execute an asset allocation
that correlates with your personal investment strategy.
Step five. Insurance.
The security of preventative maintenance
in all aspects of your life and those around you,
though not always mandatory, is almost always necessary
to acquire and have a yearly review
of the following insurance types:
health insurance, life insurance,
long term disability coverage,
renters or homeowners insurance.
Since it is recommended that you review
your auto insurance rates at least once a year,
look to bundle your quotes to have a better chance
of getting what you need at a lower price.
Yearly checkups aren't just for doctors and dentists.
They also contribute to your financial wellbeing,
which is related to your sense of security and health.
Although it is a good practice
to automate your financial goals and payments,
it can be all too easy to set it and forget it.
If you dedicate the time and the funds
towards your financial education,
you will get out of it what you put into it with interest.
(gentle music)