8 Personal Finance Skills to Master in 2021

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 of us would probably choose something related to financial wellbeing.

Mountain America Credit Union is in the business of helping people make good financial decisions—that’s why we put together this list of simple-to-master financial strategies. Take a look!

This isn’t just a one-and-done strategy. Regular saving over time can add up quickly—even with small investment accounts. Meet with a financial advisor and make regular investments over time. Doing so could allow your money to grow into real wealth that can provide you with eventual lifestyle freedom.

1. Budgeting—This is the foundation of a good financial plan. You really can’t effectively implement any other financial strategy without coming up with a budget and sticking to it. Unfortunately, only about one-quarter of Americans have a written financial plan.¹

    

   The biggest benefit of a financial plan is that it provides a framework to know where your money is going and where you WANT it to go. To start, write down a list of all your income (money coming in) and all your expenses (money going out). Use your bank statements or mobile banking app to track spending—every dollar!—into spending 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 are 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 sticking to it. Do your research, know the market value and don’t forget to look at the deal from the perspective of the other party.

   
   

   • 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, put a saving plan into place and start putting money away. Develop the crucial skill of recognizing the difference between needs and wants to give yourself the best possible handle on 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 $5,300.² Although they may be a necessary evil, there are things you can do to decrease their impact—or, if you’re already getting a low interest rate, use these tips to keep it there.

    

   • Shop around—Take time to compare prices. Oftentimes, you can find a better deal. If not, then you can at least be confident you are paying the best price available.

   
   

   • Watch for a balance transfer deal—If you are carrying a balance on your credit card, keep an eye open for balance transfer offers. With responsible credit card 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 on your credit score—Boosting your credit score can’t help with existing credit card debt and loans, but it can certainly help to 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, cut back on expenses or increase your income by freelancing or selling unwanted items around your house.




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 or not—today is a great day to start!

¹Schwab 2019 Modern Wealth Index
²Experian: Credit Card Debt in 2020