The U.S. Treasury defines financial capability as “the capacity, based on knowledge, skills and access to manage financial resources effectively.” Once we understand more about healthy money management habits, we must ask ourselves: Am I putting my financial knowledge to work?
April has shifted from National Financial Literacy Month to National Financial Capability Month, highlighting the importance of taking action. What are some healthy actions you can take, or positive habits you can adopt, to move closer to achieving your financial goals?
Understand where you are now
Before you start dreaming of new ways to spend your money, request a free copy of your credit report at annualcreditreport.com and make sure you’re up to date on all your current payments. Staying current on things like your rent, mortgage, utilities and other bills is an important way to strengthen your financial health and may help you improve your credit report, which could lead to more affordable loan rates in the future.
Consider ways to pay off debt sooner
If you have multiple, high-interest rate loans, you may want to explore options to consolidate debt. If you’re a homeowner and have built equity in your home, a home equity line of credit, commonly called a HELOC, may help you reduce your interest rate and/or your total monthly payments. Having breathing room in your budget also can help you get out of debt faster by avoiding making minimum payments on credit cards or other open-ended, high-interest loans.
Save for the unexpected
Starting a savings account may not be the most exciting way to put your money to work, but it could be a huge step toward a better financial future. According to a Bankrate’s 2023 survey, 49% of U.S. adults have less savings or no savings compared to a year ago. Preparing for the unexpected now, could help you avoid racking up high-rate debt.
