Staying in charge of finances is a primary goal for most people. Working paycheck to paycheck may sometimes make you feel like you've lost control. But there's information available to help you not only take charge of your finances but also plan and prosper.
MyMoney Five Helps Plan
With the goal of increasing financial literacy, MyMoney.gov was launched in 2004. MyMoney Five is a plan to help you know and grow your finances.
There are several elements to MyMoney Five that will provide a road map to help you prosper. These include:
- earn
- save & invest
- protect
- spend
- borrow
Earn Is the First Step
What you earn must be monitored. Taking control of your finances starts with understanding your paycheck. Analyzing your employee deductions and reviewing your taxes is important.
Scrutinizing your taxes will motivate you to look for and take advantage of tax deductions and credits. By doing this, you lower your tax burden and add dollars to your finances.
Investigate any retirement savings plans that your employer may offer. Contributing to your retirement through withholdings may lower your tax burden. An employer may match a percentage of your contribution. This aids in planning for your financial future.
Consider also: Elements of a Financial Budget
Saving and Investing Is Key
Before you spend make sure you save. Saving and investing dramatically influence your financial future. No matter what your income is, meet with a qualified financial adviser. Start planning for retirement or a child's education.
It's also important that you have money set aside for those unplanned expenses or emergencies.
Track your savings. Often when people keep an eye on their savings it keeps them top of the mind. And check with your bank or credit union about automatically making savings withdraws from your paycheck. This is the out-of-sight, out-of-mind way to save.
Know the difference between investing and saving. If you choose to invest, consult with a qualified professional.
Consider also: Is Acorns a Good Way to Invest?
You need to be able to react to planned and unplanned life events.
Protect Finances
The third principle of MyMoney Five is protect. You must be vigilant in protecting your financial future. Ways to protect your financial future include:
- buy insurance
- be aware of identity theft
- save for emergencies
- be vigilant with your credit report and score
Insurance means more than just health. You should consider disability and life.
Protect yourself from identity theft by examining your bank statements and credit card bills. Watch for discrepancies and report them immediately.
Be aware that if any of the MyMoney Five elements are missing or ignored, the potential results could devastate your financial future.
Spending Must Be Thought Out
When you think of the MyMoney Five element spend, think of living within your means. To do this, a firm budget must be developed. When spending money, always consider your short-term and long-term financial goals and act accordingly.
Borrow When Necessary
Sometimes it's necessary to borrow money. But although you may be borrowing for a needed major purchase, borrowing comes at a price. Interest is charged on loans. The longer it takes to pay back a loan, the more interest is paid. So, shop around for the best interest rate.
To qualify for a good interest rate, you must have good credit. Pay close attention to your credit score. Having the ability to borrow money at a low-interest rate is another way to plan for and maintain financial success.
Consider also: Money Myth: Cash Advances are the Same as Purchases
Life Events Affect Finances
Life can get in the way of your financial plans. You need to be able to react to planned and unplanned life events.
Some life events include:
- higher education
- new baby
- death of a family member
- retirement
These possible life events and milestones make it necessary to have a solid financial plan. Although some of these life events are planned, you still want to be financially prepared for any unplanned events.
Conclusion
MyMoney Five's principles are a blueprint not only for financial security but financial growth as well. Follow this blueprint and stay in solid control of your finances and future.