4 Finance Tips Everyone Should Know

24.02.24 05:48 PM Comment(s)

As the old saying goes “money makes the world go round.” And while that’s still the case, you should set yourself up in the best position to manage your finances. In a time where most Americans can’t even ​cover $1,000 of expenses​, financial literacy can be necessary. We know that many people are struggling financially at the moment and not all of this advice will be useful to everyone, but we hope that you can take something from it. 

Have an Emergency Fund

We can’t stress this enough, create an emergency fund. Seriously, you may not realize how important it is, but it can be a lifesaver. ​77% of Americans​ are stressed about their financial situation. That’s not good for anyone, but an emergency fund can help relieve some of that stress. And an emergency fund can be easy to create too, just start by putting away a little extra money each month. Eventually it’ll add up and you’ll have a good enough fund for anything that life throws at you. As a good rule of thumb, you want enough in your fund to finance six months of expenses.

Create a Budget to Manage Your Finances

I think we may run this advice into the ground, but that’s because it’s pretty important. You should have a budget, so if you don’t, ​make one​. It should be pretty quick and easy to create, especially if you start simple. You can always expand your budget in the future. Just make sure you look at your current spending habits and expenses, such as bills, to see where you need to put money first. Afterwards, you can put extra money towards entertainment and fun or something else, like investing. 

Creating a budget can also help you figure out what your six months of expenses are for your emergency fund. Or better yet, find out where you can put money towards your emergency fund. Always leave a little bit of wiggle room in your budget for unexpected expenses, because they’re bound to happen. And anything left over can go towards an emergency or rainy day fund.

Take advantage of tax-advantaged investments

Use a tax-advantaged investment vehicle, like an ​IRA​, to lower your tax hit. Sure, you can’t take the money out penalty-free until you reach a certain age, but it allows you to invest and save for retirement. An IRA can help you increase your overall return on those funds.

For a traditional IRA, you won’t be taxed on any funds added to the IRA, which effectively lowers your taxable income at the end of the year. If you choose to use a Roth IRA, qualified distributions will be tax free. So with a Roth IRA, while you’re still taxed on the income, you can avoid taxes on returns later in life. For 2020, if you are under 50, you can only put $6,000 total into your IRA accounts. You can look at further restrictions around IRAs to see if it’s a good option for you.

Use Free Resources to Help with Finances

Tools are great and can help make financial goals easier to achieve. ​Mint​ alone can tell you where your money is going and help you make a budget easily. It can also help you set important financial goals, like making an emergency fund. ​There’s software​ to make all these financial issues just a bit easier for you.

Defynance​ has even made it easier for you to find all of these tools. With our ROEP Marketplace, you can find a whole slew of companies dedicated to helping you advance your career, finances, or even wellness. You may discover some resources for you that you never even thought of before. And accessing it is as simple as ​clicking here and making an account.