5 Proven Ways To Be More Financially Literate Than 80% Of Americans
Americans are not financially literate. Here are five proven ways to set yourself up financially that eighty percent of Americans.
Many people make it a goal to become millionaires. While that is an ambitious goal you can work toward over time, you must first learn the basics of personal finance. Many Americans, and people in general, are never taught or avoid practicing basic financial principles. Here are five proven ways to be more financially literate than 80% of Americans.
According to Lending Club, 61% of Americans live paycheck to paycheck, and another 21% struggle to make bill payments. Investopedia found nearly “80% of Americans say they’re living paycheck to paycheck.” This is a bad sign for a person’s financial well-being.
That means at the end of the month, roughly only 20% of Americans have money left over in their checking accounts. They then may have extra money to save or invest. That shows that Americans are struggling, and many were never taught the basics of financial education. It also reflects the rising cost of living, inflation, and the devaluation of the dollar.
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Pay Off Any Debts You May Have
You want to pay off any debts you may have. Common debts that many people have are:
Student loans
The typical American has $28,950 in student loan debt.
Auto loans
The average American pays $516 to $725 monthly in car loans for a used or new car.
Home mortgages
The typical American paying for a new fixed-rate home mortgage ranges from 6.81% APR to 7.61% APR.
Credit card debt
The average American has $5,000 to $10,000 in credit card debt.
Medical debt.
The Consumer Financial Protection Bureau reports that “roughly 20% of U.S. households report that they have medical debt” and “medical collections tradelines appear on 43 million credit reports.”
There are two main ways you can start to pay off your debt.
The first way is by paying off the debt with the largest and the highest interest rate. The second way is to start with the debt with the smallest payment and interest rate.
You could pay off your most considerable debt first because it accrues the most interest. You can then pay off the next larger payment until you reach your smallest debts. The advantage of this strategy is that you are paying off your most immense debts first, which are the ones charging you the highest monthly interest rate.
You could start with your smallest payment. The benefit of the snowball effect is that it is psychologically helpful to pay off your smallest debt payment first.
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Stop Trying To Keep Up With Other People
You can stop trying to keep up with other people. There is no reason for you to try to keep up with your neighbor, an influencer, or the Kardashians. Someone else may have a larger house, a nicer car, or go out to eat or to the bar every week, but they may be in debt rather than owning those things outright. Each person is at their own place in their financial journey.
In college and graduate school (neither helped me career-wise), I often watched sports at a sports bar or visited a cool new bar with a friend. I was trying to keep up with people and going places where I had no business. I went because I wanted to be perceived as “hip” or “cool” and spend time with my “friends.” I am no longer in contact with any of my friends from college. It was not worth my time and money to go out.
The reality is that the people you spend time with will change at different times of your life. Most people are acquaintances, not friends.
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