TOP 5 Financial Literacy Tips to Take Into the Rest of 2022

In the latest “Ask an Expert” virtual session for the Dress for Success online community (a FREE network of support, resources, and community),?tax law expert and Savvy Ladies Helpline Volunteer Matthew E. Foreman sheds light on some of the most commonly asked personal finance questions.

Read all the takeaways from the Q&A with additional input from Helpline Volunteers Marge Schiller and Robert Sharer below!?

Q1. I have SO many bills, but I want to start saving. Where do I begin??

As the old saying goes, "pay yourself first". That means setting aside some savings before you spend anything. Aiming to save 10% of your income is a good rule of thumb.??

If your employer has a 401K, start contributing to it. In many cases, employers will match it. Even if you don’t contribute to your employer’s 401(k), or you’re an independent contractor, you still have until 4/15 of the next year to make a contribution to an IRA, and it may be tax-deductible.?

Generally, focus on tax-deductible or tax-deferred options.?

Q2. Should I INVEST my savings or KEEP THEM as cash??

It’s important to first create an emergency fund. Make sure you set aside enough money that’s sufficiently liquid, meaning you can easily access it when needed, which would give you a couple of months of runway in case of an emergency. The rest can be invested.?

Q3. What is the BEST approach to start paying off debt??

If you have significant debt, develop a plan to pay it off. Focus on the highest interest debt first. For example, credit cards are usually high interest (don’t run up credit card debt–it’s invariably very expensive!), while student loans have comparatively low-interest rates.?

Consider debt repayment a priority. The fewer financial burdens on your paycheck the easier it is to make ends meet and build a lifestyle.?

If your debts plus basic living expenses for housing, utilities, and food make your cash flow negative, it is time to seek professional help. See below for resources.?

Q.4 What to do if you can’t pay taxes??

If you can’t pay your taxes in full when the return is due, file on time and the IRS (or any state) will send you a bill in a few months. You can ALWAYS enter into a payment plan.?

As a general rule, pay state taxes first, which usually have a higher interest rate than federal ones. All states and the IRS offer payment plans for a low cost, or for free.??

Q.5 What is the best way to start setting up a budget??

For starting up your budget, first take a look at your income for the past few months. Make categories of things you need (food, transportation, etc.) and prioritize them. Set amounts for each expense category, and also make sure you leave room for saving. Every two months, reevaluate your budget and adjust.?

While a monthly budget is the accepted standard for planning, you may manage better with a payday chart to plan for the use of every paycheck and income source during the calendar year.?

Using budgeting apps like Mint or You Need a Budget, setting up an ASP (auto-saving plan) or even putting money aside in physical envelopes are other ideas to help manage your cash flow.?

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Have more financial questions? You can contact your local Dress for Success affiliate for access to personalized financial education resources OR contact the Savvy Ladies Free Financial Helpline to be matched with one of their?financial expert volunteers.?

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