Personal finance basics you probably didn't learn in school

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Personal finance basics you probably didn't learn in school

When young adults get out into the real world, it often becomes very apparent that some of life’s most important skills are often not taught in school. You may know when the Battle of Gettysburg was, but do you know how to file your taxes? Get out your preferred note taking tools, because here’s a crash course in some essential elements of personal finance.

Budget, budget, budget

The most important money management tip that someone should’ve told you along the way is to make a budget every month. Knowing what’s coming in and what is going out is crucial to financial stability. If you realize you have more going out than coming in, take a closer look to find out where you can improve. Making a budget doesn't have to be complicated. In fact, here's an easy-to-use budgeting spreadsheet to get you started.

Know your credit score

Just like you wanted to know the score you got on a test, you want to know this financial wellness score. A good credit score is typically above 700, while a score above 800 is considered excellent. Here are eight reasons you need to pay close attention to your credit score.

Choose a credit card carefully

Research the type of card that might suit your needs best. To start, you most likely won't be able to get a reward credit card, as these typically require a high credit score. But after you build good credit, you'll have more options open to you and can get the one that will best suit your lifestyle. For example, if you plan on traveling, consider a travel rewards card. If you’re just looking for a card for general spending, a cash-back card might be best.

Read the fine print

Many credit cards try to reel you in with flashy promotional offers. Be sure to read through the terms and conditions carefully. If the card is interest-free for a year, look into what the interest rate will be once the promotional period is over.

Be prepared for tax time

Taxes are complicated but here are some essentials.

File: If you had taxes deducted from your paycheck, you need to file income tax. Be sure to obtain a W-2 form from each company you worked for. Most employers will send you your W-2 by January 31.

Start early: Tax day falls in mid-April, but you’ll have your W-2s much sooner. Allowing yourself time to gather your tax documents and seek help if needed will prevent you from scrambling in April.

Get educated: Being a full-time student can affect your tax filing in a number of ways. Your parents may still be claiming you as a dependent, in which case you cannot claim any exemptions. If you are paying for your own education, you may eligible for certain deductions. It’s important to know your status and what you may be eligible for.

You can check out this in-depth guide about how to file taxes for more specifics.

Plan for retirement

You are never too young to start saving for retirement. The sooner you start saving — and the more you save early on — the more secure your financial future will be. Also, when you start at a job, ask about your employer’s match program. At the minimum, you'll want to contribute enough to earn the maximum match.

Insurance

Insurance is typically one of the first independent financial ventures young people embark on. As with anything else, doing your research is essential. Here are a few types of insurance to think about.

Car Insurance: Request quotes from multiple insurance companies to make sure you're getting the right coverage for you. Be aware that your location will impact your premium. Also, look into whether you need certain coverage. For example, if you're leasing your car, you may be required to have a certain amount of collision coverage.

Health insurance: Health care can be confusing, but it's important. Whether you’re going through your employer or on your own, it’s tempting to choose the cheapest option, particularly if you’re generally healthy. But this may not always be the best route. If you are established with doctors, check to make sure your preferred doctors are in-network. You'll also want to check to see what your co-pay and deductable will be for different plans. Open enrollment is running until Dec. 15, but your state may extend the enrollment deadline. You can find out in this state-by-state guide to open enrollment.

Renters insurance: Many landlords require tenants to have renters insurance. Shop around ahead of time so that when you fill out a lease application, you are ready to get your policy.

Becoming financially independent can seem daunting, especially if you feel as though you have not been adequately prepared. School may not have taught you all you need to know about personal finances. Therefore, educating yourself is crucial. Being financially literate will pay dividends not only now but throughout your life.

This article originally appeared on CentSai.

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