We may not learn everything in school, some things we need to learn by doing or watching other people. Here are 10 a lifelong money lessons we all should know but are rarely ever taught.
#1. Your salary is not your take-home pay.
We all remember that first paycheck where you had calculated out exactly how much you thought you were getting only to discover that somebody named FICO and other taxes took up to 30% of your income. It can be sticker shock when you get your first paycheck.
#2. What your credit score really is and how to build good credit.
Your credit score can be checked as often as you want through a variety of free sites. This is a score between 301 and 850 based on how much credit you've used in the past and how responsible you are with paying off your debt. You want to keep that score above 650 since future creditors will consider you less trustworthy and deserving of the better rates if you are under this number.
#3. Don't make just the minimum payment.
Paying the minimum amount on any credit card is a bad habit to get into. If you pay over, anything over the minimum payment goes directly to the principal paying down the debt even faster. Paying only the minimum could take an extremely long time and you'll be paying a lot in interest fees depending on how much that you have.
#4. Start investing as soon as possible.
People that start investing in their 20s will have quadruple the amount that those who invest in their 40s. Start now or as soon as possible and the payoff will be bigger in the end.
#5. Talking to your family about money.
Talking about money is uncomfortable yet I can't tell you how many people I've spoke with that had a spouse die or an aging parent and nobody knew anything about the money, finances, payments, debts or assets. Talk to your family, your kids and your parents about your finances so that everybody is on the same page throughout your life.
#6. How 401(k) plans work.
Using your company's 401(k) plan is a great retirement saving option. You'll get tax advantages and the money is automatically taken from your paycheck before you have a chance to spend it and in some cases, the employer offers a 401(k) match which is basically free money. Call your human resources administrator to ask about the necessary paperwork to get started.
#7. Build up an emergency fund.
At the very least set aside $1000 in a savings account as an emergency fund so that you don't have to put emergencies on credit. Once you get that built up, consider building up a three-month cushion of expenses. This means that if you stopped working today you could comfortably survive with all the bills that you have for the next three months.
#8. How to pay bills each month.
Paying yourself first is one of the most effective ways to build wealth yet many people choose to pay everyone else first. Start by paying yourself first which means considering your savings as much is a priority as the rent or utility bills.
#9. Not all that is equal.
Choosing to pay the wrong debt off first could cost you a lot of money. First, rank all of the debt you owe in order of the interest rate from highest to lowest. Pay off the debt with the highest interest rate first and once that is paid off tackle the next debt with the highest interest rate.
#10. Be careful of financial advisers.
They may not always be on your side or act in your best interest. You have to look for your fiduciary duty working to a legal standard in your best interest, not just to steer you into buying overpriced investment options. Ask perspective advisers specific questions such as do you consider yourself a fiduciary? How are you compensated? Are you a licensed or registered investment adviser?
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