With the unemployment rate slowly falling, many Americans are
facing a healthier job market and trying to get their financial
lives back on track. Based on findings of the FINRA Investor
Education Foundation's National Financial Capability Study of
more than 25,000 Americans, the FINRA Foundation has developed
five tips to help you manage daily financial challenges and build
a brighter financial future in 2014.
1. Do take advantage of tax breaks when saving for
college and retirement.
If you have financially dependent children, try to save for
college using tax-advantaged savings accounts like a 529 plan or
Coverdell Education Savings Account. The FINRA Foundation's Study
revealed that only 34% of respondents with financially dependent
children are setting aside money for their children's college
While many Americans are not prepared for retirement, and only
54% of non-retired respondents have some kind of retirement
account, workers should use tax-advantaged savings accounts like
401(k)s to boost their retirement security. Contributions to a
traditional 401(k) are not subject to income tax withholding and
are not included in your taxable wages, and earnings on Roth
401(k) contributions are tax-free. In 2014, you can contribute up
to $17,500 to your 401(k). And if you're age 50 or over, you can
contribute an additional $5,500 for a total of $23,000. FINRA
tools and resources help consumers save
for college or retirement.
2. Do reduce your debt.
More than two out of five Americans (42%) surveyed felt
that they have too much debt, regardless of their income. The
best way to avoid an endless cycle of credit card debt is to try
to pay your credit cards in full and on time. If you have credit
card debt, pay it off as quickly as possible. Even if you're
unable to pay your whole monthly bill, always pay more than the
minimum due, which will reduce the amount of interest you'll pay.
Millennials should take extra care when using credit cards. The
FINRA Foundation's Study found that 52% of Americans aged 18-34
reported engaging in expensive credit card behaviors, compared
with the national average of 41%. FINRA Foundation resources can
help you avoid the debt trap.
3. Don't chase yield.
Investors face a difficult investing environment, with low
yields on fixed-income investments and an economy on the mend.
Some investors may opt to "chase return," meaning they put their
assets into riskier and sometimes complicated products that
promise higher yields than they can get in more traditional
investments. Investors should realize that they could be taking
on more risk if they invest in products with higher returns.
4. Don't be part of the 39%.
We asked Americans if they would be able to come up with
$2,000 if an unexpected need arose in the next month, and nearly
two in five (39%) said they probably or certainly could not. If
your finances are unable to deal with an emergency (for example,
if the transmission in your car fails or a tree limb crashes
through your roof), then you're financially fragile. The best way
to avoid this is to build up rainy-day savings in a federally
insured savings account. Even if you have no savings at all, if
you can set aside $40 every week in an account you otherwise
don't touch, and then by this time next year you will have saved
over $2,000 and won't be a part of the 39%.
5. Do check your credit report and score.
You need to do both. Only 42% of survey respondents stated
they had obtained a copy of their credit report, and only 41% had
checked their credit score within the last 12 months. With credit
hard to get and identity theft a continuing problem, it's
critical to see whether your credit history is accurate and
correct any mistakes immediately. Learn more about how your
credit score affects you and what helps and hurts your
For more information about building financial security, visit
the Investors section of FINRA.org.
FINRA is the largest independent regulator for all
securities firms doing business in the United States. Our chief
role is to protect investors by maintaining the fairness of the
U.S. capital markets. FINRA does not endorse, sponsor, or
guarantee, nor is it sponsored by, any advertisers on this
site, and any dealings with those advertisers are solely
between you and the advertisers.
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