April is National Financial Literacy Month and a study released by the National Foundation for Credit Counseling and the Network Branded Prepaid Card Association showed that 42% of Americans give themselves a C, D or F when it comes to their knowledge of personal finance so it looks like most of us could use a little more literary in our lives.
Here are some of the key findings of the study:
· 56% don’t have a budget and 22% said they don’t have a good idea of how much they spend on housing, food and entertainment.
I know that for many of you ‘budget’ is a four-letter word and I like to use the term ‘spending plan’ instead. But regardless of what you call it, it is one of the best ways to manage and track your money so you can achieve the important goals you have. And, the good news is creating and managing a budget is so much easier today. There are tons of templates on the internet if you want to do it yourself or you can use online services like Mint.com or Mvelopes.com that also include mobile apps for smartphones.
· 40% say they are saving less this year and nearly the same percent (39%) do not have any retirement savings.
I know that many people are still caught up in the recession and saving may be difficult, however a spending plan can help you see areas where you might be able to save some money. An emergency fund is not a luxury, it is a necessity and saving for your goals can lead to big payoff in many ways including stress reduction. Remember, compounding (growing your money exponentially over time) is real but you have to have something to get the ball rolling.
· 39% carry credit card debt from month to month.
While this may be largely due to the effects of the recession, remember interest paid to credit card companies is very much like throwing money away so develop a plan to pay it off as soon as possible. In the meantime, use cards with the lowest interest rate and if at all possible stop using your cards. Need some motivation? Did you know that if you invest $200 a month (instead of paying it to the credit card company in interest) in 10 years you could have more than $36,000 from a $24,000 investment?
· 62% have not reviewed their credit report.
Really. This is scary. It has been reported that approximately 70% of all credit reports have errors – some minor and some major enough to cause you to either be refused credit or to be offered higher interest rates or worse terms than you would ordinarily be entitled to. Monitoring your credit report is also one of the best ways to prevent or stop identity theft (one of the fastest growing crimes in America) sooner. And it’s a FREE service so you have no excuse to not to use it. To get your free credit report, go to AnnualCreditReport.com. You are entitled to a free credit report from each of the three major credit bureaus (Equifax, Experian, and TransUnion) at least once a year.
· 80% say they could benefit from additional advice and answers to everyday financial questions and 42% give themselves a grade of C, D, or F on their knowledge of personal finance.
In 2010, 65% gave themselves an A or B. Why do you believe the number of people who give themselves good grades has shrunk in the past two years? What new challenges are you facing today that you may not have faced two years ago? Drop me a note and contribute to the discussion (ps@psworth,com).
For more information about Financial Literacy Month, visit FinancialLiteracyMonth.com. Check out their 30 steps to financial wellness and take the 2012 Financial Literacy Challenge – you could win $500. ps!