Managing Your Finances During Each Stage of Life

April is Financial Literacy Month. As you await your tax refund, this is a good reminder to review your financial health and make the necessary changes in the way you manage your money.

Every household is directly affected by finances, no matter how much money you make. Often, it is worries over finances.

According to the 2013 Financial Literacy Survey sponsored by the National Foundation for Credit Counseling, 77% of respondents admitted to having financial worries. In addition, 57% of Americans indicated they are worried over a lack of savings and 43% are worried about not having enough “rainy day” savings for an emergency. 38% are concerned about retiring without having enough money set aside.

Saving money is a concern for the majority of Americans, but 40% of adults in the United States gave themselves a grade of C, D or F on their knowledge of personal finance. The majority feel they could benefit from additional advice and answers to everyday financial questions from a professional.

“We are busy with everyday life, so our finances don’t get the planning and attention they deserve,” says Bill Hardekopf, CEO of “Before you know it, you can find yourself in a financial crisis. You can take action now and avoid a financial crash later.”

Here are financial management tips for each stage of your life:

* Start saving now
Teenagers receive money for birthdays, allowance and jobs. At this early age, develop the habit of putting money into a savings or investment account. You can even collect loose change to add to this. Over time, small sums grow with interest.

* Make a budget
Budgeting is important, even for teenagers. This is the time for them to start paying for entertainment, clothing and cell phone bills. Keep a list of every expense, no matter how small so that you know where your money goes. This will make you think twice about the importance of each purchase.

Young adults are carrying less debt than before the start of the 2008 recession, primarily because they own fewer major assets, according to recent analysis from the Pew Research Center. The share of younger households with debt of any kind dropped to 78%, the lowest level since the government began collecting this data thirty years ago. The share of young adults with credit card debt dropped to 39% in 2010 from 48% in 2007. While overall debt declined, debt from student loans was the only major type of debt to increase. Student debt accounted for 15% of the total debt for young adults in 2010, up from 9% in 2007.

* Save and invest
If you are single or married without kids, this is the least expensive time of your life. You have a job and are finally making money, but you have to be smart with how you use it. You can spend it all on clothes, cars and entertainment, or you can spend wisely and save for the future. You may have just graduated from school, but this is best time to plan for retirement. Maximize your retirement accounts because even though the stock market is volatile, time and compounding growth are on your side.

* Pay down your debt
If you went to college, you may be starting out with significant student loan debt. 40% of the people under 30 have outstanding student loans, and the average outstanding student loan debt is $24,301. On top of that, you may also have credit card debt. This can be overwhelming and you must develop a plan to pay it off. Start with the debt with the highest interest rate and pay as much as you can above the minimum payment. If you get extra money as a gift, bonus or tax refund, use this as an extra payment on your debt. Clip coupons and take your lunch to work, and use the money you save to immediately make micropayments on your debt. The median outstanding credit card balance has dropped to $1,700 in 2010 from $2,100 in 2007, according to the Pew Research Center. Less than two in five U.S. adults (37%), or about 86 million people, carry credit card debt from month-to-month. This percentage has dropped every year since 2009.

* Build up your credit score
Test scores are behind you, and now is the time to focus on your credit score. This score is more important than any exam because it is how lenders judge you. Your credit score affects the terms and interest rates for all loans–credit card, mortgage and auto. The higher your credit score, the lower your interest rates, resulting in more money you can keep. Your payment history and how you handle money is so important that it may be used for apartment rental or insurance applications.

* Full disclosure of debt, credit scores and financial obligations
Before the wedding, tell your partner about all of your debt. Make a list of all student loans, car loans, credit card debt and even loans from friends and parents. Get copies of credit reports to verify all open accounts. One or both of you may enter the partnership with debt payments that will drain away money you could be saving to help you reach financial goals.

* Joint or individual bank accounts
Will you have one bank account for all income and expenses, or will you start with three accounts–yours, mine and ours? A joint account is easier to manage and will prevent some disagreements over dividing bills, but decisions need to be shared. It gives each partner some control over their own spending. Couples tend to gravitate toward joint accounts once they add children and major expenses. If you choose to have separate accounts, develop a plan outlining which account pays each bill before the first bills payments are due.

* Save for college
The best time to begin saving for college is the day you bring the baby home. There are college savings plans with tax benefits. Look at state-sponsored 529 plans and educational savings accounts. Grandparents can also make contributions to college funds.

* Inheritance and windfalls
You may receive money from a home sale, inheritance or insurance payment. This is a great chance to pay off high interest debt, like credit cards or auto loans. It is also a good time to fully fund an emergency account–six months of household income–and put more money into your retirement account.

* Teach children about finances
Children learn attitudes about money from their parents, so set a good example for your kids of saving, spending wisely and charitable giving. Take them shopping with you and show them how to compare prices, find good deals and walk away from a purchase because the price is more than you can pay. Open a bank account in their name and let them make deposits into their own account. Show them the interest they earn each month on their statement. Give them an allowance and let them make their own decisions about this money, paying for their own toys and games. This also gives them a chance to make mistakes with money. Help them understand that once money is spent, it is gone.

* Max out your retirement savings
You may still be paying for your children’s college education, but it is just as important that you save all you can for your retirement. If you retire at 65, will your retirement savings sustain you for at least 20 years? It is a good idea to save 10 to 20% of your annual income for retirement. Max out your employer’s retirement plans and your Individual Retirement Accounts (IRAs).

* Pay off your debt
It is easier to pay off credit card and other debt now while you have income. The New York Federal Reserve says two million seniors in the United States who are age 60 and over still have their own student loan debt. If you have credit card debt on multiple cards, select the card with the highest interest rate and pay as much as you can above the minimum balance every month. You can even skip dinner at a restaurant and immediately log in to your account to apply that money to your credit card.

* Have a plan to make your savings last
Today, seniors have a longer life and their retirement savings has to last longer. This may be difficult if your investments are still recovering from the recent financial turmoil. Developing a plan and a budget may require the help of a financial advisor. The FDIC provides some good information on how to help your money last after your last paycheck. simplifies the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card. The Complete Credit Card Index is the most objective and comprehensive resource on the Internet which allows consumers to compare rates for over 1000 credit cards offered in this country. Created by Hampton & Associates, the company has been analyzing the credit card industry and supplying objective websites on various consumer expenses for 13 years.

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