It pays to be moneywise: Tips for being smart about finances

Learning about the basics of financial management now can help ensure that you won't have financial problems later on in life. Here are some basic tips to get you started, including three common money management mistakes, credit card rules and how to understand the term "Annual Percentage Rate," or APR.

COMMON MONEY MANAGEMENT MISTAKES

1. Getting a big tax refund each year. This is a sign that you may be having too much tax withheld from your paychecks. If this is the only way you’re able to save, it’s certainly better than nothing (assuming that you actually save that money or use it to pay down debt, of course). The problem is that it’s not exactly the most efficient way to save. Not only are you losing the ability to earn anything on that interest-free loan to Uncle Sam, but you also lose access to that money in the event of an emergency.

2. Paying a little extra on all your credit card debt. That’s certainly better than not making any extra payments or not even paying your bill in full. However, you can pay your debt off faster by putting all the extra money towards the debt with the highest interest rate and making just the minimum payments on the rest. As one balance is paid off, you’d then put those payments towards the remaining card with the highest rate until you’re debt free.

3. Saving whatever is left at the end of the month. If you do that, don’t be surprised when there isn’t anything left to save. Instead, have your savings automatically set aside before you even have a chance to spend it. You can also have money automatically transferred from your checking account to savings accounts and an IRA.

CREDIT CARD RULES

Remember that credit cards are not “free money.” They’re more like a loan that you must pay back.

If you pay your full bill each month, you won’t have to pay interest. If you pay the minimum amount or only part of your bill, you’ll pay interest on your balance.  

Credit cards aren’t “good” or “bad.” Spending habits, responsibility, ability to make payments, and other factors determine whether a credit card makes sense.

Know yourself and your spending habits before getting a credit card.

LIFE, DEFINED: ANNUAL PERCENTAGE RATE

The annual rate that is charged for borrowing, expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This is a key factor in any credit card or loan decision.

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