Hello my dear In Trive readers! I wanted to share with you that April is Financial Literacy Month. All month long, I’ll be posting articles sharing resources with you in hopes to help you start thinking about ways to best manage your finances! I should also note that my non-profit organization The Michael’s Daughter Foundation has partnered with Chase Bank to give you a FREE Financial Wellness workshop! Please be sure to sign up and join us on April 30th from 10 am – 12 pm PST. Sign Up Here
I’m so happy to have our contributor Stephen Masters help us kick off this month with some insight about Financial Literacy Month and share some quick savings tips! Please have a look and as always…In Joy!
I was just made aware that April is Financial Literacy Month. Being in finance, I feel a bit embarrassed to say that this is the first time I had heard about it, and congress passed a resolution making it so back in 2006, but it has just started to be really publicized. I want to do my part and before doing some of my own teachings I will start by giving a shout-out to The Michael’s Daughter Foundation Financial Literacy workshop on April 30th. This is both a great organization as well as an opportunity for young and old to learn about finance in a fun and engaging way, I suggest you sign up for the workshop now.
Being that Financial Literacy month is for parents to help students become more financially aware, I would like to tell you the three things that I believe are most important and will prepare you (and your kids) to take action on their college journey and beyond. Follow these steps, and you will be assured of success.
Make a Budget and Stick to It
A budget is your financial foundation; you must know and stick to it for success. No matter your age or the money you already have for retirement or saving for college, you need to set up a budget and keep to it. It only takes a little time to look at your monthly income (how much you are making from work) and your expenses (how much you pay for things every month). You will then subtract the expenses from your income and see how much you have leftover; the leftover is your gross profit.
Income – Expenses = Gross Profit
If you have a negative gross profit (your expenses are more than your income), you need to change things cause you are getting further in debt.
If you have a positive Gross Profit, CONGRATULATIONS, you are on your way to paying for college and financial freedom!!!!!!!!
Put Savings Aside First
If you have not already started, you need to begin saving NOW. Most financial advisors will tell you to save 10-15% of your income. I am on the 15% side (more if you have kids who will be going to school), and savings should be the first thing you put on your expenses above (it is better to take it out even before you get to expenses). If you take out savings first, you know how much you have left to spend on everything else. The easy way to save 10% is to look at your paycheck, take the decimal point, and move it to the left one spot.
If you make $496.55 move the decimal point left one spot, and you save $49.65
To save 15% you multiply the $49.65 by 1.5
49.65 x 1.5 = $74.48
So you are going to put $74.48 into your savings, and then you have an Income of:
$496.55 – $74.48 = $422.07
$422.07 to use for the rest of your expenses.
Saving Now Gives You More Later
If you save now, you take advantage of compound interest; this means that for every year, your saved money will grow.
If you saved $74.48 from above at a “rate” of 5% a year, after a year, you have 5% more.
74.48 + (0.05*74.48) = 74.48+ 3.72= $78.20
Not a big change after one year, only $3.72.
However, if you are 18 now and have this savings for 30 years growing 5% a year when you are 48 years old, this will be:
74.48*1.0530 = $321.89
After 45 years, when you are 63
It would grow to:
So at a 5% interest rate, your money more than doubles about every 15 years. The higher the interest rate, the faster it doubles. Not bad at all.
This is just the beginning. To learn more about how to best save for college; CLICK HERE