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Money 101: fundamentals to help you build financial confidence


key takeaways

  • Knowledge, like money, is cumulative. You can start slowly and build momentum over time.
  • Financial confidence starts with simple habits: budgeting, saving, investing, and using credit wisely.
  • Small, consistent decisions today can have a major impact on your long-term financial future.

Do you wish that you had learned more about money when you were growing up? If so, you’re not alone. Many adults were never taught how to manage money—but financial literacy isn’t just about understanding dollars and cents. It’s about building confidence, gaining control, and creating opportunities over time.

Build a solid foundation

Just like building a house, it’s always best to start with a solid foundation. In this article, we’ll cover four key financial principles that will give you the tools and confidence you need to make smart money decisions for the rest of your life. So, whether you’re just starting out or looking to reset your financial habits, it’s never too soon—or too late—to get started.

Key #1:  Don’t spend money you don’t have

We live in a world where we are encouraged to spend beyond our means. Credit cards, financing offers, and even social media can push us toward lifestyles we can’t afford. That’s why it’s so important to develop financial discipline and good budgeting skills.

Create a budget—and stick with it

A budget—especially when you are just starting out—is an incredibly useful tool. By establishing financial priorities and tracking spending, a budget puts you in control of your money, not the other way around.

If you’ve never built a budget before, try using the 50/30/20 strategy:

  • About half of your income goes to essentials like housing and groceries
  • A portion (around 30%) is reserved for discretionary spending (entertainment, activities)
  • And a meaningful slice—ideally around 20%—is directed toward savings

While this approach may work for some, it isn’t set in stone. Depending on your income or cost of living, you may have to allocate a greater percentage to essentials and cut back on the rest. That’s okay. What matters is that you control your spending and make saving a priority.

Key #2:  Set savings and investment goals

Now that you’ve created a budget, the next step is building an emergency fund. That way, you can keep unexpected financial setbacks—everything from car repairs to medical bills—from derailing your plans.

Saving builds stability

While everyone’s needs are different, a good rule of thumb is to set aside at least 3–6 months of living expenses in your emergency savings. Since this is money you may need at a moment’s notice, it’s usually best to keep it in a checking, savings, or other easily accessible account.

Investing builds wealth1

Once you have your emergency fund in place, you can shift from protecting your money to growing it. While investing is full of unfamiliar terms and unpredictable outcomes—it all comes down to putting your money into assets that have the potential to grow over time. Here are four popular ways to do it:

Stocks: Ownership in companies (higher risk, higher potential return)

Bonds: Loans to governments or companies (lower risk, steady income)

Mutual Funds & ETFs: Diversified “baskets” of investments for broad exposure

Index Funds: Invest in entire markets or sectors (like energy or technology)

While past performance is no guarantee of future results, historically, the stock market averaged around 10% annual returns over time2 but there may be some ups and downs along the way. Just remember that time matters more than timing. The earlier you start, the more opportunity your money has to grow.

Key #3:  Use credit and debt cautiously

At some point, most people will borrow money. Whether it’s for education, a car, or a home, debt can be a useful tool—but it’s a tool that needs to be handled carefully.

Every time you borrow, you’re not just paying for the item—you’re paying interest on top of it. Before borrowing money, ask yourself the following questions:  

  • Is this purchase necessary?
  • Can I comfortably afford the payments?
  • Can I find a lower interest rate?

If you have to borrow, make sure you get a loan with the lowest possible annual percentage yield (APY). The lower your APY, the less money you’ll pay in interest over the life of your loan.

Understanding credit scores—and why they matter

When you apply for credit or a loan, the lender will immediately check your credit score and determine the amount of interest they will charge. Good scores generally receive a lower APY, while bad scores may receive the maximum because the lender is taking on more risk. That’s why maintaining a good credit score is important—it can save you thousands of dollars over time.

How do credit scores work?

Credit rating starts at 350 and runs all the way to 850. In general, anything over 670 is considered a good score, with anything above 800 being excellent. So how are credit scores calculated? Here are the five criteria credit rating agencies use to build your score and how much of a factor each one plays: 

Credit score

As you can see, your credit (payment) history is the biggest factor (35%) followed closely by the amounts owed (30%). That’s why it’s critical to pay your bills on time and keep your borrowing to a minimum.

Key #4:  Prepare for college costs

While paying for college may not be an immediate need, it could easily become one of the largest. That’s because a four-year degree now costs an average of $108,584 (public university) and $226,512 (private university).3

As intimidating as those figures can be, it’s important to remember that it all doesn’t have to come from one source. In fact, many people use what is known as the “one-third rule” when planning for education costs:

  • One-third from savings
  • One-third from your income (out-of-pocket)
  • One-third from student loans or financial aid

Start saving early

Since you could be responsible for as much as two-thirds of the cost, it’s important to save as much as you can, as early as you can. Consider opening a 529 education savings plan 1, which gives you a tax-advantaged way to set money aside for college or other educational needs. Another option is to purchase a pre-paid college tuition plan (if your state offers one) so that you can lock in today’s tuition costs and not have to worry about rising prices.

Other tax-advantaged ways to save for college

Coverdell ESA: Like a 529 plan, these savings accounts offer tax-free growth and tax-free withdrawals (when used to pay qualified education expenses).

Cash value life insurance: Life insurance provides the financial protection for your children  if unforeseen happens to you. In addition, most permanent life policies build cash value, which grows tax-deferred over time. Policy owners can access this benefit—generally income tax-free—for any reason, including paying for college.4

Roth IRA: While this is primarily a retirement savings tool, you can withdraw money from these accounts, tax-free, if you use them for educational purposes and have held the account for five years or more.

When saving for college, the important thing to remember is that the more you save today, the less you’ll have to borrow tomorrow.

Putting it all together

At first glance, personal finance and money management can feel overwhelming. But it really comes down to a few core habits:

Spend intentionally.
Save consistently.
Invest patiently.
Borrow wisely.

You don’t have to get everything right immediately. What matters is that you start—and that you keep going. And if you need any assistance along the way, a New York Life financial professional will be happy to provide the holistic guidance and support you need to move forward with confidence.

Money 101 FAQs

That’s completely okay. Start with what’s realistic—even if it’s just 5%. As your income grows or your expenses shift, you can increase your savings rate over time.

The key is to automate what you can—such as setting up automatic transfers to savings or retirement accounts—and keep your goals visible. Consistency is what ultimately drives long-term success.

Not necessarily. Debt used for long-term value—like education or a home—can be beneficial if managed well. But high-interest debt, especially from credit cards, can quickly become a burden. The key is understanding the cost and making sure it fits into your overall financial picture.

This article is for educational purposes only. Neither New York Life Insurance Company, nor its agents, provides tax, legal, or accounting advice. Please consult your own tax, legal, or accounting professional before making any decisions.

1Any reference to securities-based products and services is for informational purposes only and is not intended as solicitation for such products. Only properly licensed registered representatives may offer securities products and services

2For illustrative purposes only and does not represent the performance of any particular investment. Source: Standard & Poor's 500, 2025. Note: S&P 500 is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. Past performance is no guarantee of future results. One cannot invest directly in an index.

3Hanson, Melanie. “Average Cost of College & Tuition,” EducationData.org, February 14, 2026.
4Accessing the cash value of a life insurance policy will reduce the available cash value and total surrender value of the policy.