Becoming financially literate – meaning you understand the ABCs of managing your money – is essential to helping you get what you want from life, whether that means furthering your education, buying a car or a house, raising a family, riding out the impact of a market downturn or having financial freedom to do what you want.
So how do you develop the knowledge and skills you need to take control of your finances, even during the challenging times we're currently experiencing? Here are five things you can do to gain a better understanding of how your money is working for you:
1. Create a budget. Learn to track your money – what comes in and goes out. Whether you use a notebook or an online financial literacy website such as mymoney.gov, write down everything you spend and where you spend it – from your rent/mortgage, car insurance and groceries, to subscription services, gym memberships and takeout coffee. Once you see exactly where your money is going, create a spending plan or budget to help you meet your everyday needs while still building savings for the things you want.
2. Start an emergency fund. Times are tough for many Americans right now, but if you can, sock away a little money each month in a savings account. Aim to save enough to cover three to six months' worth of living expenses. This will help you manage financial shocks, like a furlough from work or an unexpected expense that may come along, without necessarily having to borrow money.
3. Understand and manage debt. Understanding the damaging effect of high-interest credit cards and other types of debt is crucial. Make a list of what you owe, including the lender, amount and interest rate. Then make a plan to pay down that debt as quickly as possible. Focus on the account with the highest interest rate, putting as much money as you can toward that debt until, one by one, you're debt-free.
4. Maximize your retirement savings. Saving money isn't easy, especially today, but take advantage of your employer-sponsored retirement plan by contributing as much as you're able. The money you contribute will grow tax-free until you withdraw it. Generally, withdrawals are subject to income tax at your ordinary income tax rate at the time of withdrawal, and if made prior to age 59½, a 10% federal tax penalty.
5. Invest in yourself. Learning to manage your money more effectively doesn't need to be complicated or time-consuming. There are many simple ways to develop and improve your financial literacy, including accessing the tools, articles and other resources available online at mutualofamerica.com.
You should consider the investment objectives, risks, and charges and expenses of the variable annuity contract and the underlying investment funds carefully before investing. This and other information is contained in the contract prospectus or brochure and underlying funds prospectuses and summary prospectuses, which can be obtained by calling or visiting mutualofamerica.com. Read them carefully before investing.
Mutual of America's group and individual retirement products are variable annuity contracts and are suitable for long-term investing, particularly for retirement savings. The value of a variable annuity contract will fluctuate depending on the performance of the Separate Account investment options you choose. Upon redemption, you could receive more or less than the principal amount invested. A variable annuity contract provides no additional tax-deferred treatment of benefits beyond the treatment provided to any qualified retirement plan or IRA by applicable tax law. You should consider a variable annuity contract's other features before making a decision.