 Financial Literacy In our last Financial Literacy blog, we gave you a mental primer on finances, but this week the rubber hits the road. Don’t worry, it’s just 3 simple steps you can literally finish before tomorrow: everything from getting your credit report to calculating your actual insurance needs to investing with your pocket change. Let’s get to it.
If you own even one credit card or have taken out any type of loan, no matter how long you’ve had these accounts, go ahead and get your credit report. Once a year you are legally entitled to a FREE report over at www.annualcreditreport.com. We think maybe you’ve been sold on the complexity of finances. Let’s bust that myth, shall we? Your credit report is as easy as knowing your social security number--which, incidentally, is all you need to request it. What does your credit report tell you? Your credit report gives you a snapshot of how lenders view you. This is the main lens they look through when considering a loan. Less important is your personal story or reasons for the loan, no matter how compelling. So it’s important to look at your credit report from a lender’s perspective. A credit report includes your identifying information (name, social security, etc.), trade lines (which are the amount and types of credit you have, such as credit cards, auto loans, and mortgages, and how long you’ve had them), credit inquiries (how many times you have requested a loan and a lender has looked into your report), and public records and collection notices. All of these are things that you know, but a credit report gives you an organized bird’s-eye view. Keep in mind that multiple different kinds of credit work in your favor, but the biggest factors for improving your credit score are how long you’ve had these accounts, how consistently you’ve made your payments, and your overall utilization (how much of your credit max you’re using). What’s the difference between a credit report and a credit score? Your credit report is the summary of your credit while your credit score reflects how your credit is rated. Your credit report includes all the elements influencing your credit score. Even if you currently have bad credit, you’ll now have a simplified answer and game plan on how to improve it. Will I get a ding on my credit score if I request a look at my report? Requesting your credit score does not put a ding on your credit score. Requesting your free credit report does not put a ding on your credit score. Both of these are considered soft inquiries. What does affect your credit report (by a few niggling points) are the amount of hard inquiries lenders make into your credit report. Since most people only request one loan over a broad range of time, this isn’t normally an issue. Bottom Line: The free credit report is the first drill you’ll ever have to perform on the road to financial literacy. And thankfully, it requires no skill. However, it’s perfectly normal if you feel a sense of dread towards looking at your credit history. At the end of the day, it’s just numbers on a page, and time is the #1 factor for change. As in, the older your accounts, the better. But that’s not something you can expedite, so don’t worry over something that you’ll have to wait on regardless. 2. Figure Out How Much Life Insurance You Need Most people purchase between $100k and $250k of life insurance. But here are the factors you should consider when choosing a policy, and how to calculate how much benefit your family will receive on a month-by-month basis.
You can see our example chart below:  Bottom Line: Financial independence, which most millennials have now identified as their defining factor for true adulthood, is about providing in every circumstance to the best of our abilities. A roof over our head, bread on the table, and insurance for the worst-case scenarios. You can’t look at insurance soon enough--and you’re not shoehorned into any one type of policy. That’s what we’re here for! 3) Invest 50 Bucks (Or More, If You’re So Inclined)
There is no one right way to invest. And you don’t need a huge budget to get started. Getting started is the smartest, richest thing you can do. Whether you’re conservative or a risk-taker, you’re in the right. But getting started (as simple as opening an Acorns account or spending $50 on some tried-and-true stock options) is the only step you need to worry about. Albert Einstein himself said it best: Compound interest is the eighth wonder of the world. And who are we to argue with Einstein? Here’s a few easy ways to get started:
And yes, only having $50 to get started is totally okay. Bottom Line: Sitting money only does one thing: sit. Take Albert Einstein’s advice and take the largest amount of money you’re comfortable with and put it to work for you. You ARE Financially Literate--No Credentials Required You don’t have to be a financial expert or a stockbroker to make money tick. If you’re not yet sure what you want your money to do for you, check out our other financial literacy blog and do some soul-searching. Then get ready to overlook your credit, think about your future, and start investing. As always, we’re rooting for you. And if you want our advice on investing in great health or life insurance, we hope we’re the first team you call.
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