Financial Literacy Part 2: New Hires

In part one of our financial literacy series, we focused on building positive monetary habits from the student perspective. Now, let's look at some more steps to consider as you start your new job. Putting a system in place to manage your money will literally pay off in the end because compounding your financial education means compounding your interest. (upbeat music) Step one. Financial planning. This can be a stressful task at first, but you should get familiar with your financial strengths and weaknesses by tracking your cash flow in order to analyze any budgetary changes that need to be made. For example, if you find your monthly payments for credit cards are going towards high interest rates, instead of the principal, it may be time to consolidate your debt for a lower interest rate and faster payoff. A common ratio use to manage budgeting and saving is called the 50-30-20 rule, which allots 50% towards your needs, 30% towards your wants and 20% towards your savings. Step two. Set your goals and timelines. When you organize your immediate near and longterm goals, it gives you a sense of purpose and acts as motivation that is needed to stay vigilant and to protect all that you work for by anticipating any emergencies. For example, you should contemplate items such as upcoming vacations you'd like to take, or when you would like to buy a house, so that there is a clear approach. Step three. Retirement, Regardless of where you work or what age you are, it is imperative to start a retirement account as soon as you start to earn wages. If your employer offers a 401k or a simple IRA, don't hesitate. Take advantage as soon as you're eligible. Not all plans are created equal, so do your research. Two key things to explore include: the length of time before you can enroll in your company's 401k or IRA plan, taking full advantage of any matching contribution from your company. Failing to do so means turning down free money. Step four. Investing. Some of the most common investment accounts include a 401k, a traditional IRA, and a Roth IRA. Others include a 529 Plan, if you have a child and wanna start their K through 12 and college funds sooner than later. Then, there are investments based on health care assistance, like a health savings account provided through employers or a flexible spending account that can be obtained through employers or individually. The main phrase to take with you is personal investment strategy. To get started, explore every type of investment you can from stocks, bonds, mutual funds, and annuities to cryptocurrencies. Eventually, you will learn about how investing works. This will define your style and methods as you assess the levels of risk and reward in each investment to confidently execute an asset allocation that correlates with your personal investment strategy. Step five. Insurance. The security of preventative maintenance in all aspects of your life and those around you, though not always mandatory, is almost always necessary to acquire and have a yearly review of the following insurance types: health insurance, life insurance, long term disability coverage, renters or homeowners insurance. Since it is recommended that you review your auto insurance rates at least once a year, look to bundle your quotes to have a better chance of getting what you need at a lower price. Yearly checkups aren't just for doctors and dentists. They also contribute to your financial wellbeing, which is related to your sense of security and health. Although it is a good practice to automate your financial goals and payments, it can be all too easy to set it and forget it. If you dedicate the time and the funds towards your financial education, you will get out of it what you put into it with interest. (gentle music)