Finance and money management have become one of the most important topics of the modern age. However, people simply say that people should become “financially literate” which at many times seems like a blanket statement.
What part of finance should they be learning? Should they be learning definitions of certain aspects of finance or should they be learning accounting? The thing is, people give advice and people try to help people learn finance, but simply never give actionable items. What follows is not financial advice in any capacity. Here are the best money moves to make in 2023.
Open a High-Yield Savings Account
A high-yield savings account has a with a higher interest rate than a traditional one. They are typically offered by online banks that can save money from not having physical locations. The most important part about opening a high-yield savings account is that one needs to make sure it is backed by the FDIC, the Federal Deposit Insurance Corporation, which means that if anything happens to the money in that account it is insured.
A high-yield savings account allows for the interest that one receives from holding their money in a savings account to truly matter. For example, holding one’s money in a Chase savings account may only ever yield them pennies on their interest. However, with the same amount of money invested one could receive a lot more. Most high-yield savings account interest rates are between 3-6%.
Invest Into Savings
Furthermore, if one invested $1,000 into a high-yield savings account with a 4.5% annual interest rate, then they would receive $45 over the course of the year if there were no further contributions. The greater that initial contribution the more that percent matters. For example, let’s increase that $1,000 to $10,000 with the same interest rate. After a year of annual interest at a rate of 4.5%, one will have an extra $450, all because they sat their money in a high-yield savings account.
Inflation eats at people’s savings accounts making them less and less valuable each year. If one’s savings account isn’t receiving contributions, then the relative amount of money still in said account is being eaten by inflation. To combat this, both opening a high-yield savings account and generally making contributions to one’s savings accounts will help against this. Once again, making sure that the high-yield savings account one chooses to sit their money in is FDIC insured is of the utmost importance.
Open a Roth IRA, Make Contributions, and Invest Those Contributions
Opening a Roth IRA is an incredible money move specifically because the younger one does it, the greater the returns are. A Roth IRA is a tax-advantaged individual retirement account. Essentially, one can place their money in the account, invest the money, allow for compound interest to happen, and when they are much older they can take it out tax-free.
This is why the younger that one establishes a Roth IRA for themselves the better, the interest made on the interest will grow into a healthy retirement fund. Like many money moves it does require a certain amount of money every month contributed and invested.
One can open a Roth IRA in minutes on websites like Fidelity and Vanguard. Once created simply come up with a number one is comfortable with placing inside the Roth IRA and do so. Then, one must also invest the money inside the account so that it doesn’t just sit there but is actively working towards growing. Subtract one’s age from 100, whatever number one comes up with should be the percentage one invests in stocks.
The rest can be into steady reliable investments like U.S. Bonds. For a 20-year-old the ratio would look like investing 80% into a S and P 500 index fund for guaranteed diversity, and reliable returns, and 20% into a US Bond index. No one has to look at stock charts or read “Rich Dad Poor Dad” for this strategy, which is simple and hands-off. However, all of this relies on the idea that this is a person who is responsible with their money in the first place.
Use a Monthly Budget Spreadsheet To Stay On Top of Your Spending
Finally, one of the simplest and easiest money moves is to simply track one’s purchases and stay on top of one’s spending. A monthly budget creates a visual of that month’s financial priorities and spending options. If one is buying too many delivery pizzas, one can clearly see this if all purchases are being logged down.
Using that information, one could attempt to feed their family using that pizza money for something less expensive. Creating a monthly budget, and establishing priorities like saving towards a new car, or for college can be a great way of taking charge of one’s personal finances. The point of all this is to make sure one is making money moves that ultimately contribute to greater financial health and a brighter financial future.
Written by Kenneth Mazerat
Sources
Investopedia: Roth IRA Fund Options from Fidelity by MATTHEW JOHNSTON
Career Contessa: Intro to HYSA: Why Sooner is Better for High-Yield Savings Accounts by CAREER CONTESSA
Investopedia: What Are the 5 Purposes of Budgeting? by Amy Bell
Featured and Top Image Courtesy of Sasha India’s Flickr Page – Creative Commons License
First Inset Image Courtesy of Brad Smith’s Flickr Page – Creative Commons License
Second Inset Image Courtesy of Free Images’ Flickr Page – Creative Commons License
