How To Close Your Financial Blind Spots | News, Sports, Jobs
Knowing enough about the money to cover your bills is a start, but financial literacy isn’t enough for long-term security. Most of us ultimately wonder what else we should be doing – and if what we don’t know could hurt us.
“When you have a blind spot, you only realize when something blinds you,” says Mark DiGiovanni, a certified financial planner in Grayson, Georgia.
IDENTIFY THE GAPS
Self-assessments, like this quiz adapted from the Financial Health Network, as well as personal finance books and websites can help shine a light on what you don’t know.
Accredited financial advisor Bret Anderson of Morrison, Colo. Has spent much of his career helping incarcerated veterans get back on their feet and has also advised wealthy clients. He says five things frequently predict who will manage their money successfully.
Two habits – saving and investing – are essential, he says. Good money managers too:
– Know how credit works.
– Have a plan to build wealth and pay off debt.
– Know what passive income is and how to create it.
If anything on this list is unfamiliar to you, it suggests a starting point for research. “There are a lot of resources handy on Google,” says Heather Winston, associate director of financial planning and consulting at Principal Financial Group.
NAIL THE BASICS, THEN KEEP LEARNING
Before adding complexities, make sure that you are:
– Economy. It is an essential habit.
– Budgeting. If you don’t have a formal budget, look online for help creating one.
– Emergency planning. You cannot avoid unforeseen expenses. But an emergency fund, great credit, insurance – or all of that – can keep them from devastating your finances.
Next, protect your money and your access to credit. Here’s how:
CHECK YOUR CREDIT SCORES AND REPORTS, suggests Anderson. Lenders and potential homeowners or employers can see them, so it’s a good idea to know what’s out there. Plus, a large variation in your score or an account on your credit reports that you don’t recognize could suggest identity theft.
You can check your credit reports for free at AnnualCreditReport.com. Many personal finance sites and credit card issuers provide access to free credit scores.
KEEP YOUR IDENTIFICATION INFORMATION SAFE and practice good cyber hygiene. This means avoiding public Wi-Fi, being careful what you post on social media, not opening attachments or links you didn’t expect, and using strong passwords. Consider freezing your credit – and your child’s – to reduce the likelihood that you will be a victim of identity theft. Setting alerts on your credit card accounts can also notify you of their usage.
LEARN TO RECOGNIZE SCAMS. Scammers try to create a sense of urgency so that you pay first and think later. They know how to make phone, email, or text communication feel real. Pause before you act, independently confirm contact information, and initiate communication yourself. And remember, no one legitimately asks for payment by gift card or prepaid debit card.
SET GOALS FOR YOURSELF and remember that these are individual. “One of the most important lessons to learn is to stay focused on your needs, not on what someone who doesn’t know you, your goals, or your life is saying,” Said Winston. Consider working with a paid-only trust financial planner or financial coach to help you identify your own goals and path.
AVOID OVERCONFIDENCE. If you’ve been successful in investing in a bull market, for example, you might not be an investment genius. Professional feedback can help you decide whether you’ve been smart or just lucky, says DiGiovanni.
Help your children become financially literate. And put advice in language they understand, Anderson says. He remembers his mother putting money aside in a “Fund for rainy days”, which made no sense to him because where they lived, it rarely rained. Help the kids see how relevant money is, he suggests. Show them how you make financial decisions, then let them make some of their own.
LEARN AS NEEDED
You don’t have to become a walking financial encyclopedia. There are things you may never need to know, or can learn when they become relevant. Examples include:
– Financial consequences of big changes in life, such as marriage, divorce, parenthood or retirement.
– Refinancing of a mortgage.
– Rental or purchase decisions.
– Save for college.
– Mandatory retirement withdrawals.
– Tax implications of ancillary jobs.
DO NOT WAIT
While no one wants to be wrong, the more expensive one might just wait to have “extra money” or have more confidence in your financial decisions. The sooner you start saving and investing, the more compound interest can increase your wealth.
“People don’t understand the time value of money”, Said DiGiovanni. “Every day that you postpone is another day you have to work.”