Financial literacy is important. However, if a person doesn’t understand the significance of it or isn’t motivated to improve their financial health, understanding how to calculate compound interest or recognizing the benefits of paying debts off early isn’t going to help. Without action, financial literacy is just information.
If you lack the motivation to create a budget, clip coupons, or get your financial documents in order, why not try something simple to get started? Sometimes, getting financially healthy can require a lot of work and patience and that can deter people from even starting. But if you can find one or two things that are both simple and rewarding, you may be able to mentally prepare yourself to put financial literacy in action.
Here are a few simple and rewarding things you can do today. They may not have a huge effect on your financial situation, but they can eventually lead to some healthy financial practices and behaviors that will.
Build savings with change
Whenever you buy something with cash, take the change and put it in a jar. It doesn’t matter if it’s a few cents or several dollars: don’t spend it — save it. Eventually, you should open a savings account if you don’t already have one and start saving there. However, if saving is not a regular part of your routine, using a jar at home is a good way to start: seeing the jar fill up with money can be a motivating visual and demonstrates that even saving a little bit of money here and there can add up over time.
Drop (at least) one expense and put that money towards savings or debt
Do you regularly stop by a coffee shop before work? Go out for lunch? Catch a movie during the evening? Have any subscriptions that you rarely use? Drop one of these things today and refrain from picking it back up for at least a month.
Take the money you usually put towards these things and put it into a savings account, or better yet, add it to a retirement account (like a 401(k) or IRA). The money you save may seem insignificant. However, if regularly invested, that little bit of money can grow to thousands of dollars over time.
Similarly, if you use the money to pay down the principal of a debt, you can pay off your debt early and save a lot of money in interest. If you are paying the minimum on your debts, most of it likely going towards paying interest; your principal balance likely doesn’t change from month to month, or if it does, the change is likely minimal. However, by increasing your payment and applying the extra money towards the principal, the change in your debt balance will be noticeably lower.
Review past checking and savings account statements
It’s important to know where your money is going. However, regularly tracking your expenses and reviewing your finances can require a lot of work. If you’re not up for that yet, start by just looking at your checking and savings account statements over the past three months. If you don’t have them around your home, you should be able to get copies online.
Take a look at your balances. Is your balance getting lower and lower every month? If so, you are likely spending more money than you are making and saving. If it’s staying the same, you’re not losing money, but you’re not making money, either. Ideally, your most recent account balance should be higher than it was a few months ago.
This doesn’t completely capture your financial situation — you’ll still want to do a cash flow analysis at some point. However, taking a look at your recent statements should only take five minutes and you’ll get a basic idea of what’s going on with your finances in return.
Get started today
Don’t sit on the financial knowledge you have. Put it in action and start saving, investing, and getting out of debt.