8 Personal Finance Skills to Master

If given the opportunity to choose one piece of advice to hand down to your children (after being kind, taking care of the planet, eating their veggies etc.), what would it be? Many parents would probably choose something related to financial wellbeing. Mountain America Credit Union is on board with that and we've got some tips to help you do it.

1. Budgeting—Unfortunately, only 36% of Americans have a written financial plan. As the foundation of a good financial plan, you really can’t effectively implement any other financial strategy without first creating a realistic budget.

   The biggest benefit of a financial plan is that it provides a detailed map to show you where your money is going and where you WANT it to go. To start, write down a list of your income (money coming in) and your expenses (money going out). Use your bank statements or mobile banking app to track spending—every dollar!—into categories. Common categories include food, housing, utilities, subscriptions, entertainment, pets, transportation and savings.

   Once you understand what your costs are, find places to cut back. Set up envelopes (either physical or digital) and, every payday, designate your paycheck fully into the various envelopes. Once the money in that spending category is gone, wait until your next paycheck before you spend money in that category again.

2. Negotiation—Many people don’t like to negotiate, but it’s a skill that will be beneficial throughout your life—and it can put more money in your pocket. Whether it’s asking for a raise, buying a new car or weighing a job offer, here’s what you should keep in mind:

   • Don’t be afraid to walk away—If you're willing to say no, you’ll have more confidence to wait for the best deal. Trust your gut and remember that no matter the offer, another option is always available. As you learn about the finer points of negotiation and put them into practice, they will become second nature to you.

   • Be reasonable—Good negotiating doesn’t mean just coming in with a lowball offer and being unmoveable. Do your research, know the market value and don’t forget to look at the deal from the perspective of the other party too.

   • Be perceptive—Keep an eye on your negotiating opponent. Watch for clues as to what type of person they are—do they seem like they are willing to bend a little or are they a by-the-book type?

3. Recognize needs vs. wants—You may want a new computer, but do you actually need one? If the answer is no, take the opportunity to put a saving plan in place for this purchase. This will develop the crucial skill of recognizing the difference between needs and wants and give you an added level of understanding to successfully manage your finances.

4. Lower your interest rates—The only way to avoid interest rates and debt is to use cash for everything. That is easier said than done for most people, especially since the average credit card balance in America is about $6,400. If you're carrying credit card debt, there are strategies to reduce its financial impact—and if you already have cards with low interest rates, these same tips can help you maintain them.

   • Shop around—Take time to compare credit card rates, incentives and terms—you may find a better deal. If not, you can at least be confident you're credit card is among the best currently available.

   • Watch for a balance transfer offer—If you're carrying a balance on your credit card, keep an eye open for balance transfer offers. With responsible use, a credit card with a lower interest rate can save you a lot of money. Make sure you understand the terms of the offer, including how much time you have to pay off the transferred balance before the interest rate goes up.

   • Work to improve your credit score—Boosting your credit score won’t help with existing credit card debt and loans, but it can lower interest rates on future ones. Pay your bills on time and in full, ask for higher credit limits, keep your credit cards open and make sure you have a mix of both credit and loans. These strategies can have a beneficial effect on your credit score.

5. Invest—Financially successful people go beyond budgeting, spending less and saving more—they make investments. If you’re just starting out, find ways to free up money in your budget to jump into investing. Try cutting back on expenses or increasing your income by freelancing or selling unwanted items around your house. Start small and learn the ropes—and if you're not ready to go it alone, meeting with a financial advisor can help.

6. Reuse, recycle, DIY and food prep—Flea market finds, doing your own maintenance and repairs, and making your own lunch instead of going out—these strategies not only save money, they also provide a strong sense of personal satisfaction.

7. Boost your efficiency—Upping your efficiency means spending less in the long run. How? Combine your errands to avoid making multiple trips, make a grocery list (and stick to it), drive a more fuel-efficient vehicle, change all the light bulbs in your home to energy-saving LEDs or simply reduce the amount of unused items in your home. Big or small, these changes add up to more money in your pocket.

8. Practice being content—The question is not can you live with less; it’s can you be happy with less. Setting your own standards for happiness can sometimes be a challenge, especially when you’re surrounded with friends and family sharing their latest purchases on social media. But with a positive attitude and clear financial goals in mind, the long-term results will be worth it.

   Keep in mind that just because you CAN afford it, doesn’t mean you SHOULD.

Hone these skills to bring about positive change in your financial health. Whether you’ve paid close attention to your finances in the past or not, today is a great day to start!