Would it surprise you to know that only 41 percent of Minnesotans and 34 percent of Americans can score 80% or above on a basic financial literacy quiz? According to the FINRA Foundation’s National Financial Capability Study, those numbers are the reality.
August is National Wellness Month, and with financial issues being one of the most common sources of stress among men and women in the US, financial wellness is an important part to a happier, stress-free you!
Can you answer these five questions regarding your financial wellness?
1. How much should I save from my paycheck every month?
Ever heard of the 50-30-20 rule? Fifty percent of your monthly after-tax income should go toward necessities such as housing, food, and utilities. Thirty percent can be spent on your wants such as going to the movies, taking a camping trip with your family, or buying a new outfit for your friend’s barbeque. The remaining 20 percent should be paid to yourself by saving for retirement, adding to your emergency fund, or contributing to a specific goal, like a new fishing boat! Take advantage of bank technology to automatically transfer money from your paycheck to your savings account and remember this: Don’t save what’s left, save what’s needed.
2. Do I have enough in my emergency fund?
This is where that 20 percent you save matters. According to Forbes, 44 percent of Americans do not have enough saved to cover a $400 emergency, yet the median out-of-pocket cost for an unexpected medical expense is $1,000. At a minimum, your emergency fund should be enough to cover three months of expenses. If you’re not sure what that amount is for you, try this emergency fund calculator.
3. What is the interest rate on my savings account? How much am I paying in interest on my loan this month?
If hypothetically you have $5,000 in your savings account and it's earning 2% APY*, how much have you earned in interest in a year? Yes, you’re $100 richer! If you take out a $5,000 loan to help pay for that new fishing boat and it has a 6% APR**, do you know how much you’ll owe a year in interest? Yes, it really is $300! Interest rates*** are important to know and track. The more informed you are, the better decisions you can make about spending and saving your hard-earned money. If you’re unsure contact a banker!
4. What is my credit score?
If you do not know your credit score, do you know where to find it? Check with one of the three credit bureaus or another provider, such as FICO. If you do know your score, great! Do you know what it means and how it is impacted? This image from Experian shows where your score falls. The most influential factor on your credit score is your payment history on loans and credit cards, but total debt, amounts owed, length of credit history, the types of accounts you have, and percent of credit limit used are other influential factors.
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5. Do I open the credit card bills and bank statements I receive?
Ever had a charge on your credit card bill that you did not recognize? You are not alone, most people have! When you found out what the mystery charge was, were you relieved? What if that small charge turned into a big one the following month? If you don’t open that bill or bank statement you could miss that big charge. You could miss important communication, so take a few minutes to look over your bills and statements every month! Conveniently, Village Bank offers eStatements so viewing your monthly statements is easier.
Are you a financial wellness expert now? Share these tips and tag us on Facebook (@VillageBankOnline), on Twitter (@VillageBanking) or on Instagram (@villagebankonline)!
*Annual percentage yield (APY). **Annual percentage rate (APR). ***All rates are hypothetical. See a banker for current rates.