When it comes to managing money, there are things everybody should know. Not knowing certain facts about your personal finances could cost you dearly. In some instances what you don’t know really could be expensive.
Here are 8 Personal Finance Facts You Should Know!
- Know how long your savings would last if you were not working. Best financial practice is to have six months of emergency savings available. If your emergency savings fall short of covering your living expenses for six months, it is important to either save more now or have some other funds that can be easily available should you run out of cash.
- Know your Annual Percentage Rate (APR) on your credit cards. The APR is the annual rate charged for borrowing. You should know how much carrying debt forward costs you. The average credit card APR is 47% and varies from 0% to over 50%. If you are carrying credit card debt forward, pay off the card with the highest APR first.
- Know what your insurance deductibles are. If you have to make a claim on your car insurance, homeowners insurance, or renters insurance, do you know how much your deductible will be? You should know your deductibles so that you can be prepared to pay it in case of an emergency. Also, you may consider voluntarily raising your deductible to get a reduction on your annual insurance premium.
- Keep track of where your pensions and life insurance policies are. It is easy to lose track of old company pensions or life insurance policies you took out ages ago. Keep these important documents in one place, ideally a fire-safe box and scanned files backed up on the cloud, so that you can easily access them when you need to.
- Know how much you are saving for retirement. It isn’t sufficient to simply stash money in your 401(k). It is important that you know how much you will need for retirement and have a plan for how you will reach that amount by the age you wish to retire.
- Know what factors affect your credit score. There’s a lot of misinformation about credit reports and credit scores. Take time to research facts.
- Know how to read your credit report (and how to order a free credit report!). It is important to review your credit report regularly for inaccuracies, mistakes, and even fraud.
- Know what your monthly income and expenses are. Following a budget (which includes knowing your income and expenses!) is a critical component to financial health. Financial goals are met when you know you are saving “X” per month. Financial goals are not met when you try to save whatever is left over at the end of the month.
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