5 important steps to financial literacy

April is National Financial Literacy Month. It’s a reminder for us all to take a moment and focus on goals for the year ahead.

Maybe you’d like to save up for a family vacation or a new car? Taking a moment to reflect on your financial future can help you better prepare for things like that and more.

But what IS financial literacy?

Financial literacy is the ability to understand and manage your money. It’s a life skill that includes budgeting, saving, investing, managing debt and planning for retirement. It’s also the first step toward financial wellness.

In simple terms, financial literacy is the ability to make informed decisions about money and financial matters.

How do I get there?

The following are five important steps to financial literacy that can help get you on the road to financial wellness:

  1. Budgeting
  2. Creating and sticking to a budget is the foundation of good financial planning. A budget helps you track your expenses, plan your spending and save for the future. It’s important to understand your income, expenses and debt to create a budget that works for you.

  3. Saving

    Saving is an important habit to develop for financial success. It’s important to save for emergencies, retirement and other financial goals, such as a down payment on a vehicle.

    To try to successfully start saving money, you need two things first:

    1. How – Will you choose to have a portion of your paycheck automatically deposited into a savings account? Will you make the payments yourself? In either case, how much?
    2. Where – A savings account where you currently bank is likely the easiest place to start, but does it earn you the most interest? Does your job offer options for savings? If you needed to withdraw money for an emergency, is it difficult to do so? As you research the best option to begin saving, you will want to determine what works best for your situation.
  4. Debt management
  5. Debt can be a useful tool when used wisely, but it can also be a significant source of financial stress. Understanding how to manage debt, including credit cards, loans and mortgages, is important for keeping a good credit score and avoiding financial pitfalls, such as borrowing more than you can realistically pay back.

  6. Investing
  7. Investing can help you grow your wealth over time, but it also comes with risks. This is where a financial advisor can be helpful. Understanding the basics of investing, including the stock market, mutual funds and retirement accounts, is essential for building long-term financial stability. A trusted financial advisor can assist.

  8. Retirement planning
  9. Planning for retirement is an important aspect of financial literacy. It’s important to understand retirement savings vehicles like 401(k)s, IRAs and pensions, and how to plan for your retirement income needs.

Why Drive®? Why me? Why now?

You may be wondering why Drive is interested in helping you learn about financial literacy. The answer is easy. We want to help you pave the way to a brighter financial future.

Financial literacy is important for everyone, regardless of income or age. While it may seem like a lot at first, learning more about it now might help you avoid financial pitfalls and achieve financial stability later.

During National Financial Literacy Month, take some time to improve your skills when it comes to money matters and enjoy some financial wellness of your own!

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