Creating a financial strategy doesn't have to be scary.

April is National Financial Literacy Month: Check out these helpful tips.

While April is National Financial Literacy Month, any time’s a good time to discuss what, for many of us, is a truly frightening subject: our finances. That’s because as Americans, as a whole, we are not always good at managing our money. In fact, a 2015 Harris Poll conducted on behalf of the National Foundation for Credit Counseling (NFCC) found that less than 40% of adult Americans say they have a budget and keep track of their spending, and 29% have been unable to set aside any money for retirement.1 What’s more, a recent Forbes survey found that 56% of Americans have less than $1,000 in their checking and savings accounts combined, and nearly a quarter (24.8%) have less than $100.2

So what can we do to exorcize our financial demons and start planning a more secure future? There are a number of proven, practical steps that almost anyone can take to help get their finances in order:

Establish an emergency fund.

Since you never know when a medical or financial emergency will strike, it’s important to save six to eight months of living expenses and keep it someplace safe and accessible. If you’re having trouble getting started, you can automate the process by having your bank transfer money on a regular basis from your checking account to a savings account. In most cases, there’s no cost for this service, and you can start with as little as $25 a month.

Protect your most important asset.

If you think about it, you stand to earn a lot of money over the course of your working life. Since your income potential is probably your greatest asset, be sure to protect it with life, health, and, possibly, disability insurance as well. That way, if something unfortunate happens during your prime earning years, you—or your loved ones—will be financially protected.

Accept an employer’s match.

If your employer offers a 401(k) match, be sure to contribute at least enough to qualify for the full match. Typically, companies will match anywhere from 1%-6% of employee contributions—which is money for the taking. Best of all, any money you contribute will be deducted pretax from your paycheck, so there’s a good chance you will feel a lighter hit on your paycheck than you expect. You may also be able to build in automatic increases, so the percentage you contribute goes up every time you get a raise.

Prioritize and eliminate debt.

Contrary to popular belief, there’s really no such thing as good debt. There’s only bad debt, and not-quite-so-bad debt. That’s why it’s important to look at any debt you have—such as credit cards, car loans, mortgages, and student loans—and eliminate those with the least favorable terms. Credit cards are often a good place to start, since the interest rates they charge can range anywhere from 10%-24%. Plus, unlike the interest on home mortgages, the interest on credit cards is not tax deductible.

Take advantage of tax-efficient tools.

Better management of your financial strategies is one of the easiest and most effective ways to improve your financial health—as is taking advantage of tax-deferred growth. Fortunately, there are a host of tools out there that may be able to manage your tax burden while helping you prepare for upcoming milestone events. For example, if you want to save for retirement, you can look into IRAs (traditional or Roth), 401(k)s, and tax-deferred annuities. For those interested in helping a loved one pay for college, 529 college savings plans can be an excellent option, or you may want to consider a whole life insurance policy since the cash value accumulates tax deferred and can be used, 100% tax free if loans and partial withdrawals3,4 are structured properly, during your lifetime.

If, after all this, you still think creating a financial strategy is scary—or if you would just like more information about any of the topics covered—a New York Life agent will be happy to help. Just click here to find an agent near you.


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Further Reading
  • 1“The 2015 Consumer Financial Literacy Survey,” The National Foundation for Credit Counseling, March 11-13, 2015.
  • 2“More than Half of Americans Reportedly Have Less Than $1,000 to Their Name,” Esquire, by Jack Holmes, January 12, 2016.
  • 3The primary purpose of a life insurance policy is to provide a death benefit. Policy loans against the cash value accrue interest at the current rate and, if not paid in full, will decrease the cash value and death benefit by the amount of the outstanding loan and interest.
  • 4Neither New York Life Insurance Company nor its agents provide legal or tax advice. Please consult your legal or tax advisor to find out the possible personal implications of the ideas presented in this article.