Important financial lessons include setting up an emergency fund with three-to-six months of living expenses
There is a lot for people of all ages to know about finance. Here are some of the most critical ideas and how to achieve them.
- Establish an emergency fund, using either a savings account or a money market fund, and keep a minimum of three to six months of living expenses in it. Do this before anything else such as paying extra on credit card balances and even contributing to your company’s 401(k) plan. (The exception is if your company matches funds; don’t miss out on that free money.) Do not tap the emergency fund except for true emergencies or situations such as paying medical bills or unexpected home repairs.
- After you have an emergency fund, invest in stocks, bonds and/or your company’s retirement plan.
- When you’re assessing job offers, look at the whole picture rather than at just salary. What amount of health insurance does the company pay for, and how much do you pay individually versus for a spouse or kids? Can you telecommute, and how much vacation time and work-life balance do you think you’ll get?
- Be self-aware of your financial style. For example, do you invest (and spend) emotionally, are you cautious (or overcautious), or do you just follow what everyone says to do? Knowing what you’re like opens your eyes to frequent pitfalls your investor type encounters, and helps you learn how to avoid them.
- If you have a credit card, call your issuer to discuss fee waivers and lower interest rates.
- Invest without the involvement of a financial adviser. They cut into your potential earnings and commonly don’t bring much of anything new to the table. Instead, check out library books on personal finance and investing.