The 4 best money management tips they didn’t teach you in school
If you need a crash course on the basics, here's where you should start.
The average student will spend 12-16 years attending school, yet leave without the basic skills needed to manage their money. This massive amount of time spent at school can further be broken be broken down into hours:
- 18,720 hours for K-12
- 5,760 hours for a 4-year College degree.
- 2,880 hours for a Masters degree.
- 5,760 hours for a PhD or Law School.
- 10,080 hours for Medical School.
Yup, that's right, even with all those hours - our modern education system fails to teach kids key life skills—like managing finances. Today, only some schools teach any kind of financial literacy, and those that do usually only teach the bare basics. In short, public schools are failing children and that failure is evident in the massive mismanagement of money. Here are some issues that plague Americans today;
1️⃣ Credit card balances jumped to $986 billion, marking a new series high in 2023
2️⃣ 32.9% of Americans have no more than $100 in their savings account.
3️⃣ Inflation - 74% say economic factors are causing them to save less right now
As a result, millions of Americans have been left completely ignorant of how money works or how to manage it. Instead, they have been left to figure out on their own how to manage their money and sort out strategies that work from those that don’t.
To help, we put together a list of things they didn’t teach you in school that can help you manage your finances, whether you’re just starting out or finally taking charge of your financial life.
→ 1. Stop Accepting Unnecessary Debt
Debt can be an unavoidable part of life—if you want to buy a house, for example. But it’s also nearly impossible to achieve financial independence if you have a lot of debt. Debt increases your monthly cost of living. Remember that all debt has an APR attached to it and is costing you money.
The more debt you accept, the less your money is worth. For example— The average credit card user carried a balance of $5,805 over the last three months of 2022, research firm TransUnion found. According to Max Zahn, the figure marked an 11% increase from the previous year. And since the average APR offered with a new credit card today is 23.55% —$5,805 in credit card debt will cost you $1,361.04 for the year if you are just making the minimum payment. That is money you are throwing out the window.
Action Step: Remember to explore 0% interest Credit Cards to avoid paying interest and pay down your . Click here to view the best cards available today. For example the Citi® Diamond Preferred® Card has a 0% Intro APR for 21 months on balance transfers from date of first transfer and 0% Intro APR for 12 months on purchases from date of account opening.
→ 2. Start Understand Your Credit Score
Your credit score is a crucial factor that determines your financial well-being. A credit score is a three-digit number that ranges from 300 to 850, and it represents your creditworthiness. It is essential to understand the factors that affect your credit score so that you can take the necessary steps to improve it. Let's discuss the various credit score factors and how they can affect your creditworthiness.
35% - Payment history is the most important factor that affects your credit score. It accounts for 35% of your credit score. Late or missed payments can have a significant impact on your credit score. If you have a history of late payments or missed payments, it can hurt your credit score. Therefore, it is important to make your payments on time to maintain a good credit score.
30% - Credit utilization is the amount of credit you use compared to your credit limit. It accounts for 30% of your credit score. If you use too much of your credit limit, it can negatively impact your credit score. It is recommended that you keep your credit utilization below 30% to maintain a good credit score.
15% - The length of your credit history is also an important factor that affects your credit score. It accounts for 15% of your credit score. If you have a long credit history, it shows that you have a good track record of managing credit. On the other hand, if you have a short credit history, it can negatively impact your credit score.
10% - Credit mix is the types of credit you have, such as credit cards, loans, and mortgages. It accounts for 10% of your credit score. Having a mix of credit can positively impact your credit score. It shows that you can manage different types of credit.
10% - New credit is the number of new credit accounts you open. It accounts for 10% of your credit score. Opening too many new credit accounts in a short period can negatively impact your credit score. It can make you look like a risky borrower.
Action Step: Download the True Finance app now to view your credit score. Now you can view which credit score factors have a negative & positive impact on your score. While you are at it, review your credit report to ensure all debt is your to ensure you are not a victim of identity fraud.
→ 3. Maximize Your Match
If you have a full-time job and your employer offers a retirement plan, be sure to participate. If nothing else, this will help you lower your tax liability. More importantly, if your employer matches employee contributions, you should contribute at least enough to get the entire match. Employer matching is far-and-away the best guaranteed return you’ll ever earn—an instant 50% to 100% return on your contributions (depending on your plan specifics). It’s free money.
While you should contribute enough to maximize your match, that doesn’t mean you should go overboard on retirement plan contributions. For one thing, annual employee contributions are capped at about $20,000 per year (even less for certain plan types). And, don’t forget that participating in a retirement plan means locking up money in an account until your 59 ½. You’ll pay a penalty if you withdraw money before then.
→ 4. Set A Budget
If you’re here, it’s probably because you’re trying to take control of your finances and put yourself on the path to financial independence. How else are you going to do that if you don’t know whether your spending is appropriate relative to your income?
Successfully managing your money requires making a budget. It can be informal—even just a mental list of things you spend money on each month and an estimate of how much you spend on those things. But, you’ll have a lot more success if you memorialize your budget on paper and hold yourself accountable when you spend too much.
People say you should always live within your means, but people in the FIRE community know the real secret is to live BELOW your means. Making a budget is how you make sure you’re doing that.
Expert Tip: Lots of people use Quickbooks for making budgets and tracking spending. I personally preferred Quicken when I was in charge of tracking household finances, because I found it easier to enter future income and expenses to forecast balances. But, Quicken also facilitated my neuroticism about tracking money.