Money places a central part in our day-to-day lives, yet the majority of us have yet to master the money basics. There are so many skills you can learn to improve your financial well-being—no matter what state your finances are in!
Money can be intimidating, especially when you find yourself spending more than you save. Check out the 7 money skills City Girl Savings knows anyone can master.
#1 Budgeting
Often, when people think of budgeting, their mind immediately goes to spreadsheets and difficult calculations, which feels stressful! Spreadsheets and calculations can absolutely come in handy, but they are not what makes up budgeting.
The main money skill to master when it comes to budgeting is knowing how much money you have coming in and what you are spending it on. That’s really it!
Keep in mind what is coming in and what items you need to purchase during the month, like groceries, kids’ clothes, and so on.
Mastering your budget means you’ll avoid having your finances slip through the cracks, and you can keep yourself from sliding into debt.
#2 Building Credit
Credit simply means one party—often a credit card company or bank—offers money or resources to a person, who promises to repay the first party in full at a later date.
Mastering credit is a major part of your financial power. Credit can help you get the things you need now, like a loan for a car, based on your promise to pay for it over time.
Improving your credit means you’ll qualify for those loans when you really need them. Proving that you can pay what you owe each month is a great way to start building your credit.
An easy way to do this is to open a credit card and make small purchases on it, which you pay off in full every month. This will help you avoid accumulating interest and improve your credit score.
#3 Investing
Investing your hard-earned money can be a scary idea. No one wants to invest and see their money disappear!
For beginners, try investing in a high-yield savings account, which will allow you to invest as much or as little as you want. However, you’ll only gain a fraction of your savings back in interest.
Be sure to do your homework and invest your funds wisely, not based on what seems “hot” at any given moment. Mastering investment means mastering a bit of knowledge about your investment options.
The bigger the risk, the more you stand to gain—or lose. But just because you are not familiar with investing doesn’t mean you can’t get started.
#4 Managing Debt
The word “debt” can make us nauseated all on its own, but in life, we have to take the bad with the good.
When dealing with your debt, there are two main aspects you need to master. The first is principal, and the second is interest.
The principal is the amount you owe, and interest is a percentage of that total that the lender charges you monthly for borrowing from them. It is important to keep in mind what these terms mean and how they will affect you when handling your finances.
Interest is the lender’s way of making money from their loan. In order to get your debt down to zero, you’ll need to start by chipping away at the principal loan value while accounting for interest.
This is why it’s so important to use low-interest credit cards or loans, and to be mindful of how much you will actually owe on anything you borrow.
#5 Balancing Your Accounts
Budgeting is about allocating funds towards certain accounts, items, or bills. Balancing your accounts means making sure your accounts stay in the positive at the end of each month.
Now, this may sound intimidating but trust us, it’s one of the easier financial skills to master. Both balancing and budgeting start with knowing what money is coming and what is going out.
If you are blindly spending money and not tracking your funds, we urge you to stop that habit immediately! The best way to deal with your finances may be to combine the balance and budget aspects together to create a ‘balanced budget.’
A balanced budget means you distribute your income and expenses to create a zero or positive balance each month. Ideally your goal is to either have more money in your account at the end of the month, or to break even.
If you end the month in the positive, you can invest the leftover money, distribute it into your next budget plan, or use it for extra debt payments.
There is a difference between balancing and budgeting your funds, and they both need to work together to help you avoid debt and keep your finances in check.
#6 Making More Money
Making more money may feel impossible with the current state of the world. However, trust us when we say that there is always money out there to make!
The most important thing about your financial health is growing your monthly earnings, which you can accomplish by cutting spending and by increasing your earnings.
Making more money will enable you to pay off debt faster and start building wealth. It is always a great plan to have some savings and to think ahead in case of an emergency. Increasing your earnings will make that possible.
#7 Using Credit
People are not born with money skills; they are learned over time. Building credit and using credit wisely are different!
Once you understand how credit works, you can start using credit to achieve your financial goals. The key thing to remember is that you need to pay off your credit cards in full every month.
Choose a credit card that offers rewards that matter to you, like points toward travel or cash back. Mastering credit can actually move you closer to your other financial goals!
Once you have a handle on what is in your budget, we assure you, all will be good in the neighborhood.
Related: 5 Easy Ideas to Help You Master Your Budget
Are you skilled at mastering money? What tips have you found along the way that have been beneficial? We love hearing from members of the community, so drop a line and say hi! Check us out via our Instagram, YouTube and Twitter accounts @citygirlsavings. Also, chime in via our City Girl Savings Facebook page.
