Top 5 Financial Questions Everyone Needs to Know

According to a study by Pew Research Center, 54% of U.S. adults feel confident about financial management.¹ Managing your money can feel overwhelming and stressful, but you can gain confidence by learning about the top five questions everyone needs to know.

1. How to build your emergency fund

Building an emergency fund helps you avoid debt when facing unexpected repairs or expenses. Start with a goal of saving at least $1,000 by setting up automatic transfers to a savings account when you receive your paycheck. Once you’ve reached this goal, aim to build your emergency fund to cover at least three to six months of living expenses. Texell’s Save First Accounts encourage you to save by offering an enhanced high-yield rate. Learn more at Texell.org/savefirst. 

2. How to reduce debt

Make a commitment to paying off your debt by following one of the two most popular strategies: debt snowball and debt avalanche. The debt snowball method focuses on making the largest payment possible toward the smallest debt while maintaining the minimum payment on all other debt accounts. Once the smallest debt is paid off, roll those funds that were used for that account over to the next lowest balance. Continue this process until you pay all debts.

With the debt avalanche method, start by paying as much as you can to the debt with the highest interest rate while making minimum payments on any other debt accounts. After that account is fully paid off, transfer those funds to the balance with the next highest rate. Whichever strategy you use depends on which one motivates you to follow through and become debt-free. After you pay off your debts, review your spending habits to avoid repeating the same situation.

3. How to create a budget

Your budget provides a road map for where your money is going. Make your money work for you by following the 50/30/20 budget rule for expenses: spend 50% on things you need, 30% on things you want, and then save 20%. Things you need include rent or mortgage payments, utility bills, phone bill, gas and groceries, and insurance premiums. Include a budget line for occasional necessities that do not occur monthly, like shoes and clothing or repairs and maintenance for your car and home.

After you set your budget, track expenses to prevent overspending on things you want. Use an app or other digital tools to make tracking easier while on-to-go. For Texell members, Insights in the Digital Banking app helps you create a budget and track spending. Learn more tips on budgeting in Building a Basic Budget Part 1 and Part 2.

4. How to build credit safely

Having a strong credit score helps you get approved for financial products like a mortgage or property lease. However, you don’t have to use credit cards to build your credit history. Secured loans use funds in either a savings account or certificate of deposit (CD) to guarantee your loan. By making consistent payments on time, you’ll build your credit report and increase your score. You can also ask to be added as an authorized user on a trusted family member’s credit account, but make sure they have a good credit score and are financially responsible. Learn other tips for building credit without using credit cards in 4 Ways to Start Building Credit.

5. How to set financial goals

To get started with setting goals, you need to get a snapshot or overview of your finances. Make a balance sheet to track income and expenses and list current debt. Next, list any big items you’d like to save up for and any investments you’d like to achieve. If you have debt, start with setting a goal to reduce debt and become debt-free. Create SMART goals (Specific, Measurable, Achievable, Relevant, Time-bound) to track your progress. For example, if you had $1,200 on a credit card, a SMART goal would be to pay $100/month (plus the accrued interest) to pay off the credit card debt in one year. To make these goals easier to track, set a schedule or timeframe for short-term (within the next year to 3 years), mid-term (3-7 years), and long-term (7+ years).

Digital tools help you stay on top of your goals and track your progress. Use Insights in Texell’s Digital Banking app to set goals, estimate when you’ll achieve the goals, and view your progress so you can adjust as needed. For more tips to manage your money and build confidence in financial literacy, visit Blog.Texell.org/manging-your-money. 

¹ Roughly half of Americans are knowledgeable about personal finances from pewresearch.org.

If you wish to comment on this article or have an idea for a topic we should cover, we want to hear from you! Email us at editor@texell.org.