Celebrate National Financial Awareness Day with a Financial Plan

August 14 is National Financial Awareness Day! And while the origins are not exactly clear, the goal of this holiday is to serve as a reminder to ensure your and your family’s finances are a top priority.

When considering your personal finances, it’s normal to feel intimidated and oftentimes many folks are left wondering where to even start. The good news is that we are here to help.

We hope the foundational steps below will inspire you to start a new financial plan or update your existing one.

Let’s get started!

1. Create (or tweak) your monthly budget.

According to nationaltoday.com, only 42% of Americans have more than $1,000 in their savings account. If you are one of the 58% who does not have dedicated funds set aside for an unexpected expense or small financial emergency, you’re potentially jeopardizing your financial stability as many statistics show that it can take only one unplanned expense to derail your finances.

A time-honored budget principle is to ensure you have more money coming in than going out. You can get complicated and break out your color-coding spreadsheet skills, but don’t feel as though it’s a required step. Simply set aside some time in your day, grab a cup of coffee, a pen and paper, and log in to your online banking portal to assess your current financial situation. If you find that your expenses are totaling more than your monthly income, it’s time to make some cuts.

Now, if budget cuts sound like an extreme process, keep in mind that these do not have to be drastic changes. A few tweaks can have a positive impact on your financial future.

• You can start brewing your coffee at home and eliminate your daily coffee shop run.
• You can cut your basic cable package and choose a less expensive streaming option available in your area.
• Or, you might even be able to choose a few work-from-home days each week to reduce your weekly gas expense and lower wear-and-tear on your vehicle.

Once you have some more room in your budget to accommodate a regular savings routine, outline some financial goals and/or adjust some existing ones.

The most important tip to remember is to start small and work your way up!

2. Reduce your current debt and increase your savings.

Once you’ve had a chance to review your current budget situation, now is the time to consider ways to reduce your current debt to increase how much you’re saving each month.

According to everfi.com, 83% of adults in the U.S. have at least one credit card. And, while credit cards can be useful tools to building credit if used responsibly, you want to ensure you’re not racking up too much debt or paying an unreasonable interest rate. A high-interest rate and/or a large minimum monthly payment can drain budget funds that can potentially be used for saving more or investing.

Websites such as nerdwallet.com or lendingtree.com offer side-by-side comparison tools to shop the best credit card interest rates or rewards programs.

• Do you have a long commute? Perhaps a credit card with rewards on gas purchases would be more beneficial than a small percentage of cash back.
• Do you and your family enjoy traveling? Maybe consider a credit card with double or triple travel points on every-day purchases. If used wisely, a rewards credit card could contribute to, or potentially fund, your next family-fun weekend!
• Are you only paying the minimum amount due each month or have more than one credit card? Consider consolidating multiple balances into a credit card or personal loan with a lower interest rate.
• Lastly, make every attempt to pay your full monthly credit card bill without leaving a balance. You’ll build credit and potentially earn rewards all while avoiding interest expenses. 
  

3. Research and implement an investment strategy.

This is often the step that many find the most intimidating, but it’s one of the most important.

Why?

Because you are not going to meet your financial goals by only saving (or not saving at all).

Smart investing can help you buy a home; help send your children to college or purchase a vacation or rental property; and it can even fund a passion hobby or help you start your own business.

More importantly, continued increases in inflation guarantee that your dollar will have less purchasing power in the future, so a strong investment plan can possibly outpace inflation.

Investing supplements your savings, helps cover unexpected expenses (and what was more unexpected than a global pandemic?) and ensures a stable financial future for you and your loved ones.

Here are four key points to keep in mind when it comes to developing a long-term investment strategy:

• Start saving what you can today to give your money maximum time to grow. Bonus points if you have completed steps 1 and 2 above – you’re off to a great start!
• Learn what retirement savings options are available to you. Find out if your employer offers a 401(k) plan or matches any contributions on your existing plan. Also, consider opening an Individual Retirement Account (IRA). These investment accounts can sometimes offer a broader range of investment choices than employer-based plans.
• Choose investments based on your timeline and risk tolerance. The first step in building an investment portfolio is deciding the amount of risk you’re willing to take when it comes to investing. A mix of assets can cushion against the risk of potential losses. And, it’s important to remember that the value of investments can rise or fall over time, so always keep your long-term strategy in mind.
• Consider choosing a financial adviser to guide you along the way. Fiduciary professionals put you first and avoid any conflicts of interest. They work for fee-based compensation, so their pay is the same no matter what type of investments you make. If you do choose to work with a professional, please ensure that he or she is properly licensed. The Securities Division offers free access to BrokerCheck, an online resource that allows consumers to review the credentials of investment representatives and firms.

Finally, it’s also important to be aware of the potential risks when it comes to investing. Avoid any high-pressure sales tactics or scams when searching for investments; consistently monitor your savings and investment accounts; request regular written reports detailing your account activity; and monitor for any unauthorized use of your accounts.

For more financial tips and tricks and ways to celebrate National Financial Awareness Day, visit nationaltoday.com/national-financial-awareness-day.

For more information on investing, BrokerCheck, and the Securities Division of the Tennessee Department of Commerce & Insurance, visit our website at tn.gov/securities.

Rachel Carden serves as the Director of Investor Education for the Securities Division of the Tennessee Department of Commerce and Insurance.

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