Most people think that financial literacy means correcting spending habits like $ 4 a day and investing the money in a little-known financial instrument that your roommate on Facebook can’t shut up about. It’s so much more than that.
Financial literacy is new to many people. It usually takes a long time to acquire, but the good news is we can speed things up for you and save hundreds of hours of frustration and confusion trying to prop up your personal finances.
You don’t have to spend years of compounding interest charts or weeks finding the latest stocks to get there. All that is required of you is a willingness to think differently about money. This new way of thinking builds your financial literacy.
Here are Ramit’s five simple steps that will help you become financially savvy and create a personal money management system that operates practically on the autopilot.
1. Automate your money
Let’s face it: making money and saving is hard work, but you areunderstanding How to make and save money can be even more difficult.
It doesn’t have to be. As Ramit points out, 80% (or more) of your long-term success in managing money depends on your saving, spending, and investing behavior.
The other 20% come from knowing what to do.
So why not spend 20% of your time learning finance and setting up systems to reduce the 80% of the time it takes to spend, spend, and invest these good savings?
The good news is that by automating the process of paying and saving your bills, 80% of your time spending on such good behavior can be drastically reduced. Set up recurring payments and transfers on bill recipients’ websites or directly from your online checking account so you never have to think twice about where your money is going.
You won’t miss out on the money because all (or most) of your money goes where it belongs – automatically.
Here are Ramit’s spending recommendations:
- Fixed costs – – Pay bills such as rent, utilities or debts
- Investments – – Placing funds in retirement accounts such as the Roth IRA or 401 (k)
- savings – – Put money in an emergency fund, savings accounts, gifts, vacation or down payments for large purchases
- Guilt-free pocket money – – Spending on restaurants, clothing, or entertainment
2. Discover hidden income
Are you paying for car insurance or cell phone service? Is it the same amount every month? Surprise! It doesn’t have to be. Invoices that appear to be fixed are actually not.
In fact, you are most likely paying a lot more than you should.
Wouldn’t it be great to spend less on things we don’t even like to pay for? Think bank and credit card fees, car insurance, student loans, and even your cell phone bill – accounts with interest rates or terms that we don’t seem to have any control over.
The truth, however, is that you are in control and Ramit can show you how to do one With just a few one-time 5-minute phone calls, you can save thousands every month. It is only about negotiation: Do your homework, speak to the right person, and explain why a change is needed (in your favor). Gentle nudges and requests to speak to supervisors also help.
Logical, by spending less on the things you already pay for, yYou can have more money to save, retire, or make important financial decisions.
These savings can be taken into account hidden incomethat you can use as cash for large expenses (# 3 of Ramit’s money rules), Money for books, appetizers, health, or donations to a friend’s fundraiser (# 4 on the list) or spending on health or education (# 7 on the list).
It’s much better to discover this hidden income over a few phone calls that lead to automatically reduced monthly bills than to go against that $ 4 bar. Ramit points out that going against the latte every day is painful and prepares us for failure. Changes that just make us adjust and forget about them – over just a few phone calls a year – however, allow us to focus on things that really matter.
3. Start Investing – Now!
“I don’t have time” and “I don’t want to lose money” are common excuses why people don’t invest.
As Ramit points out, nobody just LOVES spending time managing their money and certainly nobody likes to lose it (time or money).
However, Ramit has done a lot of research into investment strategies that don’t take much time to maintain and that can still pay off in significant proportions.
You don’t have to be a super smart stick-picking assistant to make money.
Here are Ramit’s top three investment drivers:
- Do some research.
- Be disciplined.
- Start early.
It takes work and constant savings to get rich, so it is easier for many people to continue procrastinating. Every additional year that you wait to start investing makes it harder to make the same amount of money. We can’t imagine that you started investing as a student, but if you haven’t started it is time to get started and become part of a long-term strategy.
Start early and you will be rich. boom – – Drop the microphone.
But what if you think you are late? It’s never too late, but for those who think they’re late for the game – they’re starting to invest in their 50s or even 60s, for example – – View funds as of the deadline and the automated withdrawal of funds to an IRA. Investing something is better than nothing. A recent Federal Reserve report, quoted by Statista, found that nearly a quarter of adults in the US have absolutely none retirement provision or pension at all – – You don’t want to be in this statistic.
4. Eliminate your debt
Sucking debt. Credit card debt is one of the biggest barriers to a rich life.
Debt prevents us from having fun and investing in ourselves. When your wealth is in the red, it is difficult to even imagine drawing up a financial plan, investing, or making a big purchase.
Worst of all, debt buries us in guilt and fear.
The good news is that Ramit has 5 steps to get out of debt quickly:
- Find out how much debt you owe.
- Decide which debts you want to pay off first
- Boost your credit score and lower your APR (and monthly payments).
- Choose the source of funding for paying off the debt
- Getting started!
You’ll be on the path to zero debt in no time.
Understanding how credit card debt, credit history, credit reports, and credit scores work – and their relationship to your overall financial health – is an important part of your financial literacy. Don’t ignore it.
5. Earn more
Although Ramit emphasizes that financial literacy is about making money work for you, make no mistake: you still have to work for your money.
In fact, making money – and more of it – is the fastest and greatest way to increase your financial strength.
Fortunately, there is no single universal safe way to make more money. Some people want to get a raise; others want to earn additional money with part-time employment or through passive income. Still others want to start a new business to replace their full-time job or their main source of income.
In addition, you can use the skills and experience you already have to start making more money and transferring it to your accounts.
In the long term or regularly, steady streams of income can build up over the long term. For example, an additional $ 300 per month becomes $ 3,600 per year, which becomes $ 18,000 or more over 5 years when the money is placed in an interest-bearing savings or investment account.
Look, we get it: the amount of information on the internet that assumes it’s imparting financial literacy or receiving financial education can seem insurmountable.
The good news is that you don’t have to spend years of compound interest charts or weeks trying to find the latest stocks to get there. All that is needed is a Sense of growth: the willingness to think differently than in the past about making money, spending and saving.
Read Ramits Money management made easy today for your financial competence.
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