One of the common ways to manage multiple credit cards and pay off debt quickly is by doing a credit card balance transfer. Are you wondering, “How do balance transfers on credit cards work?” or “What is a balance transfer?” Find out more here!

How do credit card balance transfers work? A balance transfer is when you move your balances from one or multiple credit cards to another card.

The new card offers a much lower interest rate, usually for a fixed period. Typically, you’ll find balance transfer offers advertised at a 0% introductory interest rate.

So, how do balance transfers on credit cards work to help you pay off debt? Well, a balance transfer can help you with saving money interest-free while paying off your credit card debt.

But it’s also a huge trap people fall into! This is because credit card companies offer balance transfers and the associated incentives as a way to make money.

How do balance transfers on credit cards work with credit card companies?

Balance transfers seem like one of the advantages of using credit, right?

However, some people may not pay off their transfer balances before their introductory rate expires. That allows the credit card companies to charge interest based on the agreement you made with them.

This is because, after the introductory period, the interest rate on your balances can be much higher than the 0% you paid before. These details can be pretty easy to glaze over.

The psychology of credit card balance transfers

The biggest reason people may not pay off even the best balance transfer credit cards? Because they get comfortable seeing the “new” lower interest rate, and they think they now have more time to pay.

I can’t tell you how many people I’ve spoken to who slow down on their debt repayment because they think a balance transfer is saving them money. Yes, you might have a lower interest rate but it’s still compounding on your debt. This means even though your interest rate is lower, if you slow down paying your debt or extend the time to pay it, you might actually not be saving anything in the long run!

In addition, many people end up increasing their balances through new spending. They think that, now that they’ve reduced their interest, the debt will be much easier to pay off.

How to do a credit card balance transfer the right way

It’s important to know the details of the card you are considering and how to transfer your balance correctly. Check out how to do a transfer!

1. Create a payoff plan

What is a balance transfer good for if it doesn’t help you pay off debt?

In other words, you need to make sure you can pay off your balance in full before the introductory period expires. Have you calculated how much you’d need for your monthly payments to pay off your balance in full by the expiration date?

You may run your calculations and find that you can’t pay your balance off in full before the introductory period ends. It might actually cost you more money in the long term if you make that balance transfer.

Create a debt reduction strategy and payoff plan to ensure you know exactly how much money you need and how long it will take to pay off your balance. Also, keep in mind that you usually can’t use a balance transfer to pay off your student loans.

2. Be aware of the balance transfer fees

Another question to consider is, “How do credit card balance transfers work as far as fees?” Many balance transfer agreements require you to pay a percentage of your balance as a processing fee. It will usually be anywhere from 3% – 5%.

So it’s important to ask yourself whether the fee is worthwhile (will you still save money?). If you choose to do a balance transfer, look for a card with no fees for the transfer and no annual fees.

In addition, in my opinion, it should have a 0% introductory period of at least 12 months (in which time you can work to pay off your balance).

3. Check your credit score before you apply

The most important thing to do before applying for a new card is to check your credit score and credit report. To qualify for the 0% annual percentage rate (APR), you will need to have a good or an excellent credit score. Otherwise, you may get declined.

Checking your credit score first will save you from applying for no reason. Improving your credit score can help you qualify for loans with better interest rates, saving you a lot of money!

4. Request a credit card transfer

Once you’ve decided that you want to go ahead with the credit transfers, you’ll need to send in an application to the credit card issuers. Often, a new credit card application will include the transfer request as an option.

You can also do this online or on the phone.

Before making any changes, read the fine print with the new card you are applying for.

5. Wait for the transfer to complete

Once you’ve submitted your application and requested a balance transfer, you’ll need to wait for the operation to complete. The time it takes for the balance to transfer will depend on the credit card company. Don’t forget to continue paying your balances in the meantime.

In most cases, it takes five to seven business days, but it can take several weeks to complete.

6. Do not continue to charge purchases

Just because your new credit card has a 0% APR doesn’t mean it’s time to hit the mall. Charging up purchases only adds to your debt, so it’s important to stop buying. It can also prevent you from paying off the balance before the introductory rate matures.

What is a balance transfer good for if you add more debt to your cards? Use this card for exactly what it’s for—to save you money on high interest and get out of debt for good!

Expert tip: Beware of interest rates

Balance transfers on credit cards work by offering promotional interest rates. When applying for a balance transfer, carefully consider the duration of any promotional interest rates offered.

While a 0% APR offer is enticing, I suggest having a plan in place to pay off the balance before the promotional period expires.

By creating a realistic repayment schedule and sticking to it, you can take full advantage of the promotional rate without getting caught off guard by higher interest charges once the promotional period ends.

Remember, the point of a balance transfer is to lower your debt, not get into more debt!

Alternatives to a credit card balance transfer

If you’ve decided a balance transfer isn’t financially beneficial, or you can’t qualify for a 0% APR, there are alternatives to a credit card balance transfer.

Pay off your balance in full on your current card

Remember, the credit card companies are not doing you any favors! Offering balance transfers is a strategy they use to make the maximum amount of money possible on interest. And for the most part, they always win.

If you feel like doing a balance transfer will be more trouble than it’s worth, don’t do it. The short-term gratification of a 0% interest rate that will inevitably lead to you paying more interest over time is not worth it if you won’t be paying off your balance in full before that 0% interest rate is gone.

The surest way to win is to buckle down and figure out the best way to get out of debt as aggressively and quickly as possible.

Clever Girl Tip:

If you choose to do a balance transfer, don’t run up new debt on your old or new credit card. Remember, the whole point of doing the balance transfer is to save money on interest payments. By doing this, you can pay your balance off faster.

Also, ensure you don’t miss any payments or pay late, as this could void your 0% interest rate. At least make your minimum payment, or try to pay off as much as possible each month.

Ask for a lower rate

Depending on your credit and relationship with your cardholder, you may be able to get a lower rate. They may be offering a promotional rate as well. It never hurts to ask.

Call your card issuer and ask if you qualify for a reduced rate based on your credit history and relationship.

Apply for a personal loan

You may wonder, “Should I do a balance transfer or apply for a personal loan?” People opt for a personal loan to consolidate their credit card debt because they will have a fixed rate for the life of the loan rather than trying to pay it off before the promo rate matures.

This is a good option only if the rate is lower than the rate of your current card.

For instance, if your credit card rate is 23.99% and you qualify for a personal loan with a rate of 7.99%, then it would make sense to consolidate your debt. It could save you quite a bit of money in interest if you do it right.

Remember, you still need good credit to qualify for an unsecured loan. And you still want to consider all the fees involved to make sure the new rate really makes sense for you.

Some people opt for a secured loan, such as a home equity loan, to pay off credit card debt.

However, I advise that you try other avenues to prevent risking your home as collateral.

Should I do a balance transfer?

You should only do a balance transfer if it benefits you financially i.e. it will save you money, not cost you more. That’s why it’s essential to create a debt payoff plan and know the balance transfer cost.

One other benefit of a balance transfer is it may simplify your finances by allowing you to bundle all of your payments into one.

Again, you only want to transfer your balance if you can pay it off before the rate increases. Otherwise, it’s best to get rid of debt with another method.

Will a balance transfer hurt my credit score?

A balance transfer to an existing line of credit won’t hurt your credit score, but if you apply for a new line of credit, it could impact your score.

In general, you should use a balance transfer to reduce your debt, which in turn could increase your score by reducing your credit utilization ratio.

The lower your utilization ratio (your credit limit relative to your debt), the better it is for your credit score. That’s because your ratio makes up 30% of your credit score.

Is it a good idea to do credit card balance transfers?

A credit card balance transfer can be a good idea if you have a lot of high-interest debt and can take advantage of lower rates.

However, it can also worsen the situation by giving you access to even more credit card use. If used effectively, then a balance transfer can help pay off debt.

But use a balance transfer with caution and look for alternatives to get out of, and stay out of, debt.

How does a balance transfer work on a credit card?

When you move a balance from one credit card to another, you generally want to do so to take advantage of a lower interest rate or a promotional offer. When you decide to do a transfer, you send in your application.

Once approved, the issuer will most likely pay off the balance of the old card and then transfer the debt. Then, you’ll have to start paying off your debt on the new card.

What happens to a credit card after a balance transfer?

After a balance transfer, the balance of your old credit card will be paid off, which reduces or eliminates the debt. Your old card will probably remain open.

You can then either keep and use it or close it yourself. If you keep it open, limit any new purchases or try a no spend challenge to not increase your debt further.

What is the downside of a balance transfer?

The downside of a balance transfer is it doesn’t get rid of your debt, it just transfers your debt from one issuer to another. You may also have to pay a balance transfer fee, usually charged as a percentage of the transferred balance.

In addition, any promotional rates offered are usually temporary, and the real rates can be very high. And if your old credit card stays open, you may be tempted to use it again and get further into debt, defeating the whole purpose of a balance transfer.

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You’ll love reading these other posts if you learned more about credit cards and debt payoff from this article!

• Can You Pay A Credit Card With A Credit Card?
• How To Get Out Of Debt On A Low Income
• Should You Use A Home Equity Loan To Pay Off Debt?
• 27 Tips For How To Pay Off Credit Cards Fast

Be cautious with balance transfers

So, how do credit card balance transfers work best for your finances? When they can be paid off within the 0% interest rate promotion.

However, be cautious with balance transfers, no matter how great they sound.

It’s very easy to get sucked into a balance transfer card for rewards and cash back features but then rack up more debt because of the no-interest mentality.

The key is to make it work in your favor! That’s why it is vital you figure out your debt payoff plan before applying for the card. You can pay off your debt with or without transferring your balance by changing your money habits and learning how to use credit cards wisely.

The post How Do Balance Transfers On Credit Cards Work appeared first on Clever Girl Finance.

The term personal finance ratios might give you flashbacks to math class, learning various formulas, equations, and ratios. Back then, if students looked like they were zoning out, your teacher might have told you “pay attention, this will be useful to you later.” Well, this time, you don’t have to wait—a lot of the equations below will be useful to you right now!

Let’s learn more about what ratios are and fourteen of the top money ratios you can use today!

What is a personal finance ratio?

In mathematical terms, a ratio is essentially a way to compare two numbers. Since finance is all about numbers, that can come in handy in many ways especially when making financial calculations!

You can use ratios to keep track of many different aspects of your financial situation—from cash flow to savings to tips for retirement planning and more.

A traditional ratio is expressed as a divisible number, but some of the ones below use multiplication or subtractions instead.

Ultimately, just think of it as a way to track your money and how you use it. Keeping a record of your money ratios can also illuminate how these numbers change over time.

14 of the most useful personal finance ratios

The best way to explain the ratios is just to start showing you examples! So below, we’ll explain how to use each one and why they can be helpful to your journey.

1. Monthly cash flow ratio

Monthly expenses divided by monthly income

The monthly cash flow formula helps you understand what percentage of your income is dedicated to your monthly expenses. Think about the cash flow ratio as how much cash flows in vs flowing out.

Start by adding up all your regular income from jobs, side gigs, investment income, etc. You can use a gross figure or your actual take-home pay (aka net income) after taxes.

Then, create or refer to your spending journal or a budget template or tool to see how much you spend every month. Don’t include savings or investments in your spending calculations (that has its own personal finance ratio)! Everything else is fair game: necessities, car payments, fun money, gifts, monthly debts, etc.

If you spend around $2,000 monthly and make $2,500, your cash flow ratio would be $2,000 / $2,500 = 80%. It tells you that 80% of your income is spent on expenses.

2. Savings ratio

Monthly savings divided by monthly income

This is basically the flip side of the one above. Instead of telling you how much you’re spending monthly, it tells you your savings rate.

Include all kinds of savings here. Whether you’re putting money in a savings account, your company’s 401(k), your personal IRA, an investment account, or even setting aside physical cash, it qualifies.

Using the same monthly numbers as above, let’s say you’re putting the rest of your money ($500) towards savings and investments.

Your monthly savings ratio would be $500 / $2,500 = 20% savings rate. You can also do the same to find your annual savings ratio. That way, you can decide if you want to save more to live better or if the amount you save makes sense.

3. Emergency fund ratio

Essential monthly expenses x 6

An emergency fund exists to protect you in the event of unexpected expenses or job loss. It’s money you want to keep easily accessible so you can use it as soon as needed.

As a full-time freelancer, I’ve had months where I have a ton of clients and projects, as well as months where business is a little slower. My emergency fund gives me peace of mind that I won’t be in a dire situation if my work schedule changes.

Since the common wisdom is to save 3-6 months of expenses in your emergency fund, this ratio reflects that. Simply multiply your essential monthly expenses by 6 to come up with your target for a fully stocked emergency fund.

When I say “essential,” I mean you might be cutting out some of your “fun” budgets for this one. Just include the things you can’t live without (housing, utilities, food, health insurance, etc).

Our example person may normally spend $2,000 a month, but let’s say that they can pare down their essential expenses to $1,500. $1,500 * 6 = $9000 would be the target for their emergency fund.

Keep this money in an interest-bearing account—ideally, a high-yield savings account. That way, it will remain accessible whenever you need it, but the interest will help you grow your money while it’s there! 

4. Liquidity ratio

Liquid assets divided by monthly expenses

The liquidity ratio is one of the personal finance ratios closely tied to your emergency fund since they both revolve around the idea of liquidity. Put simply, liquid assets refer to (A) cash or (B) other financial assets you can quickly convert into cash.

Money in a checking, savings, or money market account is highly liquid. If you have savings bonds you can cash in any time, they’re liquid.

If you have stocks, bonds, index funds, and other “cash equivalents” or other highly liquid investments that you can easily sell on the market, they would qualify as liquid, too. (However, their value fluctuates more, so it’s not a stable number).

Of course, you can’t just sell your house on a whim for quick cash, so that’s a great example of a non-liquid asset. Money stored in retirement accounts is also illiquid since withdrawals are subject to lots of rules and take time.

Once you have these figures, running the liquidity ratio formula will reveal how many months your liquid net worth could support you. So for someone with $20,000 in liquid assets who spends $2,000 a month, it’s $20,000 / $2,000 = 10 months of covered expenses.

5. Debt-to-assets ratio

Total liabilities divided by total assets

Now we’re getting into some potentially less fun territory: a couple of debt ratios. Don’t be scared if your numbers are higher than you’d like at first. It’s all part of your debt reduction journey!

If you don’t know where you’re starting from, you’ll just be stumbling around in the dark, hoping your debt will be gone one day.

You may also hear the debt-to-assets ratio called a solvency ratio. (Typically, “solvency ratio” is a term used for companies more often than individuals.) It’s a way to see whether you can pay off your debts by selling your assets.

Start by adding up your college loans, any consumer debt like credit cards, personal loans, car loans, and whatever other kind of debt you carry.

Then, calculate the value of your key assets, including all savings and investment accounts, paid-off vehicles, and personal valuables.

If you have $10,000 in total liabilities and $40,000 in total assets, you have $10k / $40k = 25% as much debt as assets.

Is a house counted as an asset or liability?

What about your home? Is a house an asset or a liability? It’s both! Unless your mortgage is paid off, you have equity in your house and debt at the same time.

Homeowners can choose whether or not to add their remaining mortgage balance as debt and home equity as an asset in this ratio. 

Keep in mind that since mortgages are the largest loans most people will have in their lives, including it can make your ratio seem skewed. If you like, you can run the numbers with and without the home factored in to see the difference.

6.  Debt-to-income ratio

Annual debt payments divided by annual income

This is one of the personal finance ratios that will help you figure out how much of your income is being funneled toward your debts each year. 

To start your equation, look at the debts you gathered above. But this time, add up your yearly payments towards each of them.

One exception is that if you’re a homeowner, it’s best to exclude mortgage debt from this equation—that’s a surefire way to kill your ratio! (Plus, housing payments fall more into normal expenses than debt payoff.)

Next, you’ll divide your annual debts by your annual income. Normally, people use their gross income rather than net income for this calculation. Include any income from side gigs and alternative sources as well.

As your debts shrink, the result of this ratio will, too! But if you’re adding new debts or paying things off too slowly, compound interest might increase your debt payments and, subsequently, this ratio.

Someone making $15,000 in annual debt payments while earning $50,000 a year is paying $15k / $50k = 30% of their income to their debtors.

For companies, a similar ratio called the “debt servicing ratio” helps lenders assess a business’s debt repayment ability.

7. Net worth ratio

Total assets minus total liabilities

The net worth ratio is going to be short and sweet! Grab the same numbers you used in #5, but instead of dividing, we’ll simply subtract.

Assets minus liabilities help you calculate your net worth! It’s motivating and fulfilling to watch this number grow over time.

$40,000 assets – $10,000 liabilities = $30,000 net worth.

8. Debt to net worth ratio

Total liabilities divided by net worth

This is very similar to the debt-to-assets ratio.

However, you aren’t just comparing total debt to total asset value with this one. Instead, you’re comparing your debt to the net worth figure from #7—where debt has already been subtracted from your asset value.

The ratio is meant to help you determine how much debt you’ve taken on relative to your net worth.

If your ratio is over 100%, you may feel over-leveraged and struggle with payments. The lower the result, the more comfortable you’ll feel with your debt levels.

$10,000 liabilities / $30,000 net worth = 33% debt to net worth ratio.

9. Housing-to-income ratio

Monthly housing costs divided by monthly income

You’ve probably heard some advice for spending a certain percentage of your income on housing. In the past, the rule of thumb number was 30%. Now, there’s a slightly more detailed model called the 28/36 rule.

The first part (28) means you should aim to spend no more than 28% of your income on your total house payment, including taxes and insurance.

The second part (36) adds your mortgage payment to all your other debt payments and recommends that this total not exceed 36% of your income. It’s effectively the same thing as your debt-to-income ratio from #6 (but a mortgage-inclusive version).

The 28/36 rule is a way to help you weigh whether your home purchase would put you in too much debt.

For instance, if a potential home purchase would bump you too far over the 36% debt-to-income figure, you might want to look at cheaper properties. Otherwise, you run the risk of becoming house poor!

If you’re spending $1,000 a month on housing while making $3,500, you’re spending $1k / $3.5k = just about 28% on housing.

10. Needs/wants/savings budget ratio

50/30/20, 60/20/20, or other

Want a personal finance ratio that gives you a quick guide on dividing your expenses? There are several ways to do this.

Usually, the simplest methods involve breaking down your expenses into needs, wants, and savings. Needs are everything you can’t live without, wants are the nice-to-haves, and savings are what you put aside for your future.

The 50/30/20 rule

One common budget ratio is called the 50-30-20 rule. In this formula, 50% of your income goes to necessities, 30% is reserved for discretionary income, and 20% gets saved.

Let’s see how this might work for someone who makes $3,000 a month. The 50/30/20 ratio would mean $1,500 goes to needs, $900 to wants, and $600 to savings/investments.

Other percentages

All of these numbers can be tweaked depending on your situation.

So if you’re spending 60% of your income on necessities, you might want to aim for more of a 60 20 20 breakdown or even the 70-20-10 budget.

11. Retirement ratio

25x your annual expenses

Ever find yourself asking, “Can I retire yet?” Once you stop working, you want to be confident that your savings and investments will be able to continue funding your life.

It’s a tried-and-true method for understanding what you need in retirement. It’s also based on something called the 4% rule, which refers to the idea that a retiree can safely withdraw 4% of their savings each year with little risk of running out.

Calculating your retirement expenses

Look at your current annual expenses and try to figure out if they’ll be higher or lower in retirement. Perhaps you’ll have a paid-off house by then and eliminate rent/mortgage expenses.

On the flip side, you might want to try full time traveling or have extra for medical care. It never hurts to pad the numbers, but the 25x expenses formula is a great place to start.

Someone who spends $50,000 a year would ideally want $50,000 * 25 = $1.25 million to retire confidently.

12. Credit utilization ratio

Sum of credit card balances divided by total available credit

Your credit card utilization ratio helps show how effectively you manage your available credit. High utilization could signify that you have an unhealthy reliance on debt. 

Utilization is also a big factor in determining your FICO credit score, so it’s worth paying attention to if you’re trying to improve your credit. Understanding and managing this ratio can positively impact your creditworthiness and financial well-being.

Figuring out your credit utilization 

To calculate it, take the current sum of your revolving credit account balances and divide it by the total credit limits across all your accounts.

A lower credit utilization rate helps your credit score. Avoid going over a 30% credit utilization ratio—keeping it at or below the 10% range is ideal. Focus on paying off outstanding debts and limiting the balances you carry from one month to the next. 

Consider a scenario where your credit card balances amount to $2,000, and your total credit limits across all cards are $10,000. The credit utilization ratio would be $2k / $10k = 20%. This indicates that you’re using 20% of your available credit. 

The good thing about utilization is that it essentially changes every month. Even if you have a high ratio for one month, you can pay down your balances and return to a low utilization in no time.

13. Student loan debt to starting salary ratio

Total amount of student loan, divided by expected starting salary

College is notoriously expensive. And unless you know how to get a full ride scholarship or have a college fund, it can be hard to stare those student loan offers and interest rates in the face and ask yourself, is it worth it?

The debt-to-salary ratio provides a simple guide for college students and their families to help answer this question. Will your degree be worth the debt in the long term?

This formula helps you determine the maximum loan amount to borrow for a particular degree program.

How do I tell if my college degree will be worth it?

Since you can’t predict the future, it’s impossible to calculate the exact ROI (return on investment) for a college degree. But you can look at the job market in your target field and determine what starting income you can expect after graduation. Websites like salary.com can help with this research.

Your results will also help you plan a realistic debt repayment schedule for your college loans. As a rule of thumb, students should limit their debt-to-starting-salary ratio to less than 100% to repay the loans over approximately a 10-year period. (Of course, interest rates can affect the exact timeline.)

So, let’s say you take out $30,000 in loans, and your anticipated starting income is $50,000. The debt to starting salary ratio would be $30,000 / $50,000 = 60%. The result indicates that your debt would be 60% of your expected starting salary, which is relatively conservative and reasonable.

On the other hand, borrowing $60,000 for a degree that leads to an average starting salary of $30,000 does not make as much financial sense. That would put the ratio result at 200%—double the recommended amount.

No matter what your degree costs, enroll in our free student loans 101 course bundle to ensure you clearly understand how they work.

14. Loan-to-value ratio

Remaining mortgage amount on a property, divided by its appraised value

The loan-to-value (LTV) money ratio is a crucial metric in the realm of real estate financing. Lenders reference this ratio as a part of the mortgage approval process. They also consider it for refinancing and home equity line of credit (HELOC) applications. A low LTV is good because you owe less on the loan.

Whether you’re a current homeowner or a prospective first time home buyer, this personal finance ratio will be relevant to you.

How the LTV ratio works for new home buyers

If you’re buying a home, your initial LTV will depend on the size of your house down payment. Let’s say you put 20% down on a house valued at $200,000, so your down payment is $40,000 and your mortgage is $160,000. 

That makes your LTV ratio equation $160,000 / $200,000 = 80%.

If you only put 10% down, you’ll be left with an LTV of 90%. Higher LTVs on new home purchases can come with additional costs, like higher mortgage interest rates and private mortgage insurance (PMI). 

The larger your down payment is, the smaller your LTV will be, and vice versa. Saving up at least a 20% down payment will get you the most favorable terms.

How the LTV ratio works for homeowners

For current homeowners, the LTV represents how much equity has built up in your home, i.e. how much of the mortgaged property you own. This figure also determines whether you can refinance at a lower interest rate or access a home equity line of credit.

Your LTV will decrease as you pay your mortgage, but it can also change if your appraised property value changes. 

In some cases, LTV can increase if a property’s market value drops. It can happen if there’s property damage (e.g. from flooding) or a recession hits. But it’s much more common for your LTV to decrease as your real estate value grows, which is a beneficial change.

Let’s say you bought our example home when it was valued at $200,000. After five years, you still owe $125,000, but your property value has appreciated to $250,000. That new value is the figure you’ll use for the ratio: $125,000 / $250,000 = 50% instead of $125,000 / $200,000 = 62%. It’s like getting extra equity for free!

Expert tip: Consider money ratios within the context of your life

Okay, you’ve just gone through a lot of math—take a breath! Now is the time to remember these math equations are most insightful when you put them into context. A single ratio isn’t going to provide a comprehensive view of your financial health. 

You should never feel bad if some of your ratio results are above or below the ideal numbers. You don’t have to live and die by money ratios! They’re just a guide, and there’s always room for exceptions and flexibility based on your unique situation. 

Maybe your desired college degree doesn’t come with an amazing starting salary…but it’s a field you’d love working in, with great future growth opportunities. Don’t rule it out because of a math equation.

Consider them all within the context of your personal core values, needs, and goals to make them work for you.

Why are personal finance ratios important for you?

These ratios are great ways to distill tried-and-true financial wisdom into simple formulas that anyone can use.

If you want to know whether your savings are on track—there’s a ratio for that. Curious if you’re spending too much on housing? There’s a ratio for that.

Knowing your financial numbers can help you improve your life

Furthermore, keeping a record of these numbers lets you reflect on where you came from. As you learn new frugal life hacks, you can pare down your expenses and improve your cash flow ratio.

As your income grows and you pay off debt, those debt ratios shrink in front of your eyes while your net worth swells.

They’re some satisfying little equations that give you another way to track your finances and set new goals.

What are the most important ratios for money?

Finance is a highly individualized journey, so the importance of specific ratios can vary based on individual circumstances and financial goals. But in general, there are a few ratios that everyone should be paying attention to.

The emergency fund ratio is one of my top recommendations for the beginning of your financial journey. Life can throw curveballs at anyone, anytime.

Having at least six months of expenses squirreled away helps give you a runway to figure things out if you get laid off, need to pay for a surprise home or car repair, etc.

I’ll also highlight the savings ratio, which includes traditional savings and investments. Savings are essentially your key to the future. They put all your goals in reach, whether it’s buying a house, paying off your loans, or early retirement.

What is a good debt to net worth ratio?

A good debt to net worth ratio strikes a healthy balance between leveraging debt for wealth-building and avoiding excessive indebtedness.

You might think it’s best to strive for no debt.

However, while that may be a worthy goal for some people, it isn’t always the case. In some situations, debt can be a tool to help you better your financial health. 

It ties into the concept of types of debt, like good debt vs. bad debt.

For example, student loan debt or business debt can help you earn more money throughout your lifetime. But credit card debt will eat your income with its high-interest rates.

You can think about it in terms of these ranges:

• Safest range: A ratio below 50% is generally considered healthy—indicating that your net worth is at least twice your total debt. 
  
• Moderate range: Ratios between 50-100% can still be manageable, depending on the situation. Evaluate the types of debt you have, its purpose, and whether it contributes to your overall financial well-being.
  
• Cautionary levels: Ratios exceeding 100% indicate that your total debt surpasses your net worth. It signals a higher level of financial risk, so proceed carefully and ensure you have a solid debt repayment strategy.

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If you’ve added these ratios to your financial toolkit, you’ll love these reads!

• The 23 Best Financial Literacy Books
• Financial Freedom Vs Financial Independence: The Difference
• 7 Financial Literacy Basics We All Need To Know
• How To Manage Your Money: 19 Tips To Do It Right

Calculate your personal finance ratios!

Now it’s officially your turn!

In order to start crunching the numbers, you’ll need some key pieces of information in front of you. The main things you’ll need include:

• Total annual income
• Total monthly income
• Total debts/liabilities
• Monthly expenses (broken down by category)
• Total asset value
• Liquid asset value (aka cash or things you can quickly turn into cash)
• Credit limits on your cards
• Real estate value (for property owners)

Once you have these figures in front of you, the rest is just plug-and-play. You can recalculate these personal finance ratios as often as you want—say, once a month, once a quarter, or once a year—to stay on top of your personal financial plan. Over time, if you stay the course, you might even learn how to become wealthy!

The post 14 Most Useful Personal Finance Ratios And How To Apply Them appeared first on Clever Girl Finance.

A living trust gives your estate direction, ensuring your loved ones handle it as you wish. Trusts can also help seamlessly pass the trust’s assets to your heirs by avoiding probate court. While trusts seem confusing and complex, they aren’t as complicated as they sound. With the right help, you, too, can open a trust and protect your assets, and this guide will give you a crash course on living trusts as an estate planning tool.

The basics of a living trust

If you’re wondering, “How does a living trust work?” a trust is a legal document that holds your assets, such as real estate, cars, and investments. It helps protect your assets during your lifetime and beyond. The trust takes ownership of the property, but you generally still retain control over your assets.

Your trust documents also help outline your wishes for your assets after you pass away. You can use the trust to specify exactly how you want your assets distributed.

When you die, your trustee is responsible for distributing the assets to your named beneficiaries according to the terms of the trust.

Two types of living trusts

You have two options when setting up a living trust agreement: a revocable or an irrevocable living trust. Let’s explore how each type works and why you might choose one over the other.

Irrevocable living trust

An irrevocable living trust is a sort of trust that can’t be changed.

Even as grantor or trustee of the trust, you cannot change or terminate it—without exemption. Once an irrevocable trust is in place, you give up the ability to modify it.

Thus, irrevocable trusts are less common for obvious reasons.

Why people opt for irrevocable trusts over a revocable trusts

But why would someone opt for an irrevocable trust over a revocable one?

There are three main reasons:

• You want to minimize estate taxes through a life insurance trust or annuity trust.
• You have a disability and need to shelter assets and income to avoid losing federal benefits.
• You want to protect your assets from creditors.

Revocable living trust

The revocable living trust gives you—as the grantor and named trustee—the power to make changes while the trust is in effect.

A revocable trust is the most common type because it allows you to maintain control of your assets. As trustee, you can amend trust directives as needed, including dissolving the trust if necessary.

Just know making changes or canceling a revocable trust isn’t easy. You’ll still have to deal with a ton of paperwork and jump through administrative hoops. Still, it is technically possible to change or cancel a revocable trust.

How does a living trust work?

When you open a trust, you transfer your assets into the trust. You no longer ‘own’ the assets once you put them in the trust – the trust owns them.

However, you can retain control of your assets by naming yourself a trustee. Most people also name a successor trustee should they die or have the incapacity to manage the trust.

The successor trustee’s job is to act on your behalf and distribute the assets per your instructions when you die. You can also name specific conditions the beneficiaries must meet before receiving their inheritance.

For example, you might require that your children reach a certain age or complete college to receive funds.

Setting up a living trust: How to get started

Many people skip this because they’re unsure how to get started. Although the process is tedious, it’s often not overly complicated.

Your trust can be ready to go in six steps:

1. Contacting estate attorneys
2. Selecting assets for your trust
3. Picking a successor trustee
4. Naming beneficiaries
5. Signing the trust agreement
6. Transferring assets into trust ownership

1. Contact an estate planning attorney

Can you set up a living trust by yourself? Technically, yes.

However, your trust needs to follow certain state laws and regulations regarding trusts. Without extensive legal knowledge, setting up a trust on your own could be a bad idea.

Instead, get in touch with an estate planning attorney who specializes in living trusts. An attorney may come with a larger price tag than drafting the trust on your own, but you’ll know it’s done right.

In addition, attorneys can provide valuable insight into the formation of your trust. Your attorney will make clear to you the potential impact of setting up your trust a certain way. They’ll also help you work through other aspects of your estate planning checklist.

For example, your attorney can help you determine if a revocable or irrevocable trust makes the most sense for your needs.

2. Determine the assets for your trust

The next step to creating your trust is to determine what assets you want in the trust. Common assets you might put into your trust include:

• Real estate, such as real estate investments or your home
• Financial accounts like non-active bank accounts or non-retirement brokerage accounts
• Non-qualified Annuities
• Life insurance (read about the importance of life insurance)
• High-value personal items such as fine art or expensive jewelry

You shouldn’t put retirement accounts in your trust. Adding retirement accounts to a trust requires withdrawing the funds from the accounts.

A withdrawal will likely result in income taxes on the funds. The better option is to name your trust as a beneficiary on the retirement account.

3. Choose a successor trustee

Your successor trustee is the individual who takes over as trustee after your death. Choosing a successor is an important step because this person will eventually take control of your assets through the trust.

Your family situation will play a big role in your successor trustee.

For example, parents of minor children generally choose their preferred guardians. If the parent dies while the children are still young, the guardian gets access to assets or funds to help cover the living expenses of the children.

4. Name your beneficiaries

The beneficiaries of your trust are those who will benefit or receive the assets owned by the trust.

You can choose any beneficiaries you want, including friends, family, or even charities. Think about who you want your assets to go to, especially if you’re funding an irrevocable trust.

Many people list their children as beneficiaries to help build generational wealth.

5. Sign the living trust document

Signing is the easiest part of the process.

Once your lawyer has drafted the trust documents, you can review them and make changes as needed. When you’re ready, you’ll sign the trust in the presence of a notary public. Your attorney or one of their associates will likely be licensed as a notary.

6. Transfer assets and fund the trust

Funding the trust isn’t as simple as making a bank transfer or signing a form. You must rename all assets in the trust’s name to officially put them in the trust.

This process generally requires a fair amount of paperwork and might take a while to complete. (Learning how to declutter paperwork prior to this can be helpful!)

Say you want to put your house in your trust, for example. You’ll need to make the trust the new owner by changing the property’s title. Doing this requires signing a new deed for the trust property.

Additionally, you’ll need to notify your city or county of the change, which could require a small title transfer fee.

Pros of a living trust

A living trust is one of the most useful estate planning tools to protect your assets. Let’s look at some of the benefits.

Avoids probate

If you die without a trust, your estate goes into probate. The probate process is the legal process of reading and executing a will. The probate process also appoints an executor of your estate to distribute your assets.

Probate can delay when your beneficiaries receive their inheritance. It can also be time-consuming for the executor, who must oversee everything.

A living will, however, bypasses the probate process.

Avoids anyone contesting your wishes

Even the most close-knit families can get ugly when inheritance is involved, and family financial problems could cause concerns. Challenging a will is common, but a trust lowers the risk.

Contesting a will involves petitioning the probate court. Trusts skip probate, so it’s more difficult to contest. Challengers of a trust must prove you were not of sound mind—or were coerced—into setting up the trust and funding it, in addition to a couple of other reasons, claims Smart Asset.

Trusts create privacy

The probate process becomes part of the public record. That means anyone could see how much money you’re giving to heirs or what assets you have to give.

On the other hand, trusts aren’t public records. No one will know how much you left to your beneficiaries. Taking this route also reduces the risk of someone targeting your family or loved ones based on their inheritance.

Cons of a living trust

There are plenty of reasons a living trust is a good idea, but are there downsides?

As with most things, yes, there are drawbacks.

Trusts are costly

There’s no way around it: a trust is going to cost a chunk of change to set up. You’ll need to hire an estate lawyer to help you draft and fund your trust. You might also have to pay title transfer fees to move assets into your trust’s name.

All in all, you can expect to pay between $1500-2500 in the USA, according to Contracts Counsel, to draft a living trust. The more complicated your needs or assets, the more you may have to pay.

Inconvenient to make changes

A revocable living trust may offer some flexibility, but it’s still difficult—and likely expensive—to make changes. You’ll need to contact your lawyer to sell, add, or modify assets in the trust.

Even something like refinancing your home requires your attorney to remove the asset from the trust before you can make changes to your mortgage. Then, you’ll also have to pay your attorney to re-title the asset back into the trust.

Administrative work is hefty

Setting up a trust takes a lot of consideration. You have to determine what assets to put into the trust, who will be your successor trustee, and who will be your beneficiaries.

Additionally, putting your assets into a trust means renaming the assets. For many things like your house, bank accounts, and investments, it means a lot of paperwork and potentially some fees.

Expert tip: Consider a joint trust if you’re married

Married couples can set up an individual living trust for each spouse or create a joint trust with shared assets.

Joint trusts are less complicated to set up and could make it easier for a surviving spouse to access assets.

When you are putting your financial goals and financial affairs in order, make sure to consider this simpler approach.

Who are living trusts best for?

A living trust is best for anyone who wants control over their estate. It’s not just about managing who receives your inheritance upon your death, but rather managing your estate to avoid probate and put a 3rd party in charge of certain assets until all beneficiaries satisfy any conditions you set.

Suppose you’re concerned about your estate going through probate. If your estate goes through probate, it may take more time for beneficiaries to receive their inheritance. Not to mention that anyone could potentially challenge your estate.

On the other hand, a living trust could prevent your estate from going to probate at all.

Living will and trust: What’s the difference?

A living will and trust both have to do with your estate, but the similarities end there. The importance of a will should not be overlooked, but a living trust is equally important.

Here’s what you must know about the differences between a living will and trust:

A last will goes into effect when you die

A will doesn’t control your assets when you’re alive, even if you’re unable to make your own decisions. A living trust, on the other hand, manages your assets from the moment you open and fund the trust.

You are the trustee while you’re alive (if you choose to be), and your successor trustee takes over when you cannot manage your estate.

A will typically goes through probate

Even a will with specific instructions for distributing assets will likely go through probate. The probate process typically holds up the distribution of the estate. Probate also usually has court fees and costs associated with the process.

A living trust doesn’t have to go through the probate process.

A living will is a public record, whereas a trust is not

Since the probate process is public, your will is public. This lets anyone see what you’re leaving to your beneficiaries.

A living trust is a completely private agreement. Anyone not listed in the trust would not have access to the documents.

What is the point of a living trust?

The point of a living trust is to improve the efficiency of distributing your assets after your death. Trusts avoid probate, making it easier for your trustee to distribute assets to your beneficiaries according to your wishes.

What is the downside to a living trust?

The biggest downside of a living trust is the cost and the paperwork involved in creating it. Complicated trusts may cost several thousands of dollars to create. You also have to go through the paperwork and time to retitle your assets in the trust’s name.

What is the primary purpose of a living trust?

The primary purpose of a trust is to create a smooth distribution of your assets upon your death.

Additionally, trusts give you the ability to specify how assets are to be used.

For example, you might require your minor children to turn a certain age before they receive ownership of assets in the trust. It helps to teach financial literacy for kids to your children so they have a good foundation for handling money in the future.

Articles related to trusts and estate planning

If you now have a better understanding of trusts and what they do, read these articles next for more information!

• What Is A Revocable Trust And How Does It Work?
• What Is An Irrevocable Beneficiary?
• The Importance Of Estate Planning And Having A Will In Your 30s
• Key Steps To Get Your Financial House In Order Now

Next steps: Create your own living trust

A living trust helps organize and protect your estate. Understanding the process of funding and managing the trust is important. Having a trust ensures you can determine what happens with your estate when you’re alive and have peace of mind that your successor will handle it how you planned upon your passing.

Make sure you have a good financial planning process for each part of your finances, including retirement and investing. Also, consider other important aspects of your finances that will help you prepare for the future, such as saving an emergency fund.

The post What Is A Living Trust And How Does It Work? appeared first on Clever Girl Finance.

Life insurance is one of those things that we kind of know we need, but many of us don’t want to deal with getting it right away. Sometimes, it’s hard to even think about because, for many people, the whole idea is just plain scary. However, we can’t downplay the importance of life insurance, how life insurance protects our finances and family, and how much peace of mind it can give you.

Perhaps you feel like you are young and have plenty of time, or you even feel like, if something happened to you, there would not be any major financial impact. Or maybe you can’t decide what insurance type would work best for you.

Well, if you’ve ever felt any of the above, this article is here to help you understand the importance of life insurance and how to ensure you are covered. Let’s get into it!

Benefits of life insurance

Life insurance is not something to be afraid of at all.

In fact, having life insurance is protection for you and your loved ones that can minimize or potentially eliminate financial distress.

And it’s something you want to seriously consider, especially if you have kids or dependents or hold assets like a home.

There are seven main benefits of life insurance:

1. Financial safety net for you and your family
2. Creates generational wealth
3. Covers final expenses
4. Replaces income after a death
5. Provides a tax-free death benefit
6. Customizes protection and living benefits
7. Supplements retirement or other savings

Let’s dive a little deeper into the importance of life insurance and why it’s a good idea for you.

1. Financial security for your family

The main benefit of a life insurance plan is to provide financial protection and peace of mind to you and your family.

When you have a life insurance policy, you can be sure your family will be taken care of, even if you pass away. While it’s not fun to think about, knowing your family is protected can help take a weight off of your shoulders.

That peace of mind and relief is enough of a reason to get life insurance for many people, especially if you have children.

2. Builds generational wealth

Yup, life insurance is one way in which people transfer their legacies and create generational wealth.

Having life insurance is a foundational element when learning how to make a financial plan.

When you pass, your assets go to your heirs. So, a life insurance policy can be a major asset to pass on to your children or other dependents.

But keep in mind that you don’t need to have a million dollar life insurance policy. Having enough to cover what you bring to your family is a good start.

3. Covers your final expenses

Funerals and other end-of-life costs are expensive. Depending on your final needs, your family may have to pay thousands of dollars to put you to rest.

Part of the importance of life insurance is that it’s a great way to cover funeral expenses and help you out with what to do when a loved one dies. Your beneficiary can use the proceeds of your life insurance policy to cover the final costs you may have.

4. Replaces lost income

Do you bring in income to your family? Additionally, what would happen if they suddenly lost access to your income?

Life insurance addresses this issue by replacing lost income when a family member dies. These funds can be essential to helping your loved ones cover day-to-day living expenses.

Additionally, life insurance benefits could help cover big life expenses for your beneficiaries, such as college tuition.

5. Tax-free inheritance for your heirs

Did you know life insurance has tax benefits?

For example, in general, most life insurance payouts are tax-free for beneficiaries. So your heirs will simply receive a lump sum payout without paying income tax on the money.

For instance, let’s say you have a $500,000 policy and pass away. Your beneficiary would receive $500,000 in cash without paying income or estate taxes on it.

In addition, think how far that money could go toward their short and long-term needs and financial goals, which really shows the importance of life insurance!

If you are wondering if your life insurance payout will be tax-free, refer to this helpful tool from the IRS.

6. Access living benefits with riders

Your beneficiaries aren’t the only ones who can benefit from your life insurance policy. Policyholders can use riders, also called endorsements, to customize their policy with living benefits such as:

• Long-term care
• Disability income
• Guaranteed insurability
• Critical and chronic illness riders to cover medical bills

Be aware, however, that adding endorsements to your policy generally increases your premium payments.

7. Supplement retirement savings with cash value

Specific types of life insurance can help you build wealth even while you’re still alive.

For example, permanent life insurance policies like a whole life policy have a feature known as cash value.

Cash value life insurance is a type of savings account with interest, and it’s tied to your life insurance plan. Part of your insurance premiums go into the savings account.

You can use the money in the account as extra savings, such as a boost in retirement.

Additionally, some policies let you use cash value to pay ongoing insurance premiums once you reach a certain value.

Expert tip: Don’t wait to buy life insurance

The earlier you get life insurance, the better. In fact, life insurance premiums tend to be lower the younger you are. If you wait until you’re older, you may pay more in premiums.

In order to save money and be sure your finances are covered, It’s a good idea to get life insurance as soon as possible.

The cost value of all you do and how insurance ties in

As a mom of two small children with a small business, I have a huge impact on my family’s financials. And it’s not just tied to the money I bring in with my business. It’s also from the cost of all I do in my household.

One day, I sat down to really calculate the cost value of all I do for my family, and I was surprised. Shocked even.

I added in all my jobs. They include:

• Watching and teaching my kids (Job title: babysitter/teacher).
• Cooking for my family (Job title: chef).
• Cleaning my home (Job title: housekeeper).
• Driving my kids around (Job title: car service).

If I were to hire people to do all of these things that I currently do for my family, it would cost me over $70,000 a year!

That alone would have a huge financial impact if (God forbid) something were to happen to me. And I didn’t even include my other annual financial obligations, for instance, my kids’ education expenses or our household bills and mortgage.

Life insurance is a non-negotiable for me for this reason. My 20-year, $500,000 term life insurance policy will help ensure my family is protected financially and can help to cover several years of the loss of my value and income.

My husband also has a life insurance policy in place as well since he also contributes substantial income to our family. If you are the primary female breadwinner or the only breadwinner, then putting yourself in this scenario makes having life insurance even more critical for you.

Life insurance and your long-term goals

What are some of the biggest long-term financial goals you currently have?

Personally, I’m saving for retirement and my kids’ college education through 529 plans and custodial accounts. I have a vision of exactly how I want to retire, as well.

In addition, similar to the gift my parents gave me, my husband and I have decided that we will be paying for our kids’ college education in full, wherever they choose to go. (As well as imparting financial literacy for kids to my children).

But again, if something were to happen to me, these goals could very well be thrown out the window if both my spouse and I don’t have a life insurance policy in place.

It could mean a difficult retirement for me or my spouse and student loan debt for my children. All scenarios I don’t want, and that’s why I recognize the importance of life insurance, in addition to my savings and investments, as a safety net.

Make the process of getting life insurance simple

The truth is life can be hard, and unexpected situations happen.

However, it’s better to have a plan in place than face the unknown unprepared. One key element of your plan should be getting life insurance.

The good news? It doesn’t have to be a complex process.

Term vs. permanent life insurance

The first place to start would be to determine whether you need term vs. whole life insurance that includes a cash value.

Term policies are life insurance that expires after a set number of years, known as the policy term. At the end of the term, the policy expires, and you no longer have coverage.

Typical term lengths range from 10 years to 30 years or more. Some term policies have conversion riders that let you convert your policy to permanent life insurance.

Permanent life insurance works as it sounds: it lasts your whole life as long as you keep paying premiums. While permanent coverage tends to be more expensive, you may find the additional cash value and other benefits to be worth the cost.

Determine coverage needs

Once you know if you want term or permanent coverage, you can figure out how much coverage you need. There are many life insurance calculators available online to help you estimate your needs.

You can also reach out to a local life insurance company or agent for advice on your coverage options. They’ll be able to help you calculate a death benefit amount and discuss any riders you might need.

Compare coverage options

Be sure to shop around to compare policies and rates before you make a final decision. I recommend getting at least three life insurance quotes from different providers before signing up. Getting multiple quotes for similar policies will let you compare costs side-by-side.

You should also do due diligence on the life insurance company. Try Googling the insurance company and reading online reviews. The last thing you want after you pass is for your loved ones to have to deal with a difficult life insurance company.

Apply for coverage

So, you’ve found a life insurance policy and are ready to sign up.

First, you’ll need to fill out an application. Many policies will also require a medical exam to determine your risk level. Some policies, such as online term life insurance, offer coverage without a medical exam.

After your exam is done, the life insurance company will determine your risk rating. The better the risk rating, the lower your premiums. Generally, young, healthy people pay the least in insurance premiums.

Sign your coverage and put it in force

Once your insurance application is approved, you’ll receive a copy of the policy and a form to sign. Be sure to carefully read the policy to make sure you’re getting the coverage—and premium payment—you agreed to.

What is the most important use of life insurance?

The most important use of life insurance is to provide financial support for your beneficiaries after you die. Financial support might mean paying a child’s college tuition using life insurance proceeds.

Or, your life insurance policy could help cover the loss of your income if you’re the sole breadwinner in your family.

No matter how the funds are used, life insurance is there to help ease the financial burden of your death.

What are 3 things life insurance covers?

Life insurance coverage protects your family from financial hardship after your death. The importance of life insurance can be broken into three categories:

1. Covering the daily or future needs of your loved ones.
2. Building generational wealth for your descendants.
3. Providing living benefits for you as you age.

What are the pros and cons of life insurance?

While there are many good things about life insurance, there are also drawbacks. Take a look at some of the pros and cons to help you find a policy that’s right for you.

Benefits of life insurance

The pros of life insurance include:

• Financial protection for your family
• Customized coverage to fit your needs
• Easy access through online life insurance companies
• Rounds out an estate plan
• Builds wealth for future generations
• Protect your peace of mind

Cons of life insurance

The cons of life insurance include:

• Expensive for older adults or those with health conditions
• Cash value may not provide a huge nest egg

Articles related to life insurance

If you found this article about life insurance helpful, read these informative posts next!

• Term Life Insurance VS Whole Life Insurance? What’s Best for You?
• What Is Credit Life Insurance?
• How Does Cash Value Life Insurance Work?
• Do You Really Need A Million Dollar Life Insurance Policy?

Don’t overlook the importance of life insurance

Ultimately, the importance of life insurance is to provide peace of mind that your loved ones will be taken care of. And thanks to the internet and new technology, it’s easier than ever to get coverage in almost no time at all.

Whatever your financial situation, life insurance protects you and your loved ones. Other great things to consider for financial security include building an emergency fund and investing regularly for the future.

The post The Importance Of Life Insurance For Your Finances appeared first on Clever Girl Finance.

What is a bounced check? It’s one of those terms that a lot of people have heard, but not as many can explain. And the impacts of a bounced check can seem equally mysterious!

Of course, it’s important to understand all of these things, so you can avoid being put in a messy financial situation. Whether you’re the writer or depositor of a bounced check, it can have impacts on your finances.

So much in life is unexpected, but a bounced check doesn’t need to be one of them. In this article, we’ll answer questions like: what is a bounced check? What happens if a check bounces after I deposit it? How can I avoid writing a check that ends up bouncing? Let’s start learning!

What is a bounced check?

A bounced check, also known as a “rubber check,” is essentially a check that cannot be honored by a bank. This typically happens when the account holder has insufficient funds to cover the amount of the check.

Less commonly, a check can bounce if the check writer tells the bank to “stop payment” on it—even if there is enough money in the account.

When someone writes a check, they are essentially instructing their bank to transfer a specific sum of money from their account to the recipient’s account.

However, if there isn’t enough money in the account to fulfill this request, the check bounces. In turn, this can lead to a cascade of consequences for both the payer and the payee.

Bouncing a check is not always intentional. It can happen for various reasons, such as an unexpected expense, a miscalculation of available funds, or a delay in depositing money into the account. While these situations can be genuine mistakes, they can still carry financial repercussions.

What happens if a check bounces?

Your check can bounce when the amount in your checking account is less than the value of the check amount you wrote. If the receiver tries to cash or deposit your check before there’s enough to cover the full amount, the check will bounce due to “non-sufficient funds” (NSF).

When you write a check that bounces, you’ll probably be a bit embarrassed. While it’s not always your fault (maybe an automatic withdrawal happened before an automatic deposit cleared), you’ll still have to deal with the consequences. 

Let’s look at a few potential things that can happen.

Possible fees

One of the most immediate drawbacks of a bounced check are the fees that come with it.

Non-sufficient fund fee (aka NSF fee)

A non-sufficient funds fee is exactly what it sounds like. A financial institution charges an NSF fee when a check cannot be honored due to insufficient funds in the account. Normally, this type of returned check fee applies to the account holder who wrote the check.

Each state decides the fees owed for check payments that are returned for lack of funds. These “recovery costs” generally range from $20 to $40. Most of the time, you’ll pay a flat rate, but a few states base the fee on a percentage of the amount of the check.

Fees for non-sufficient funds are like a bad chicken-or-egg scenario. If you wrote the check and truly don’t have enough money to cover the cost, then with the new fees, you can go into debt over not being able to pay. That makes it even harder to right the wrong and pay the original amount you owed.

Merchant fees

In certain cases, merchants may charge additional fees for bounced checks. These fees are imposed to compensate for the inconvenience and potential costs incurred by the merchant when a payment does not clear. 

$30 is the average bounced-check fee from merchants. That said, in most states, they’re allowed to charge up to $40.

Overdraft fees

If you don’t have enough money in your account, but your bank covers the check for you instead of bouncing it, you may face an overdraft fee instead of an NSF fee.

When an account holder attempts to make a payment that exceeds their available balance, the bank may cover the difference through overdraft protection. This service is designed to prevent declined transactions due to insufficient funds.

However, this service often comes with a price—the overdraft fee. This fee applies when the account balance goes below zero, and the bank extends credit to cover the transaction.

Overdraft fees can also come into play if you deposited a bad check and didn’t realize it. You may assume you have more money in the account than you actually do, because the check bounced. Then, you might accidentally overdraw your account and incur a fee.

Some banks offer overdraft alerts or allow customers to link their accounts to savings to prevent overdraft situations.

Impact on your credit report & banking relationships

While your primary credit report will likely remain unaffected by your bounced check, some “alternative” checking account reporting companies, like ChexSystems or Telecheck, might ding you.

As a result, banks can deny your request to open a checking account if you have any red flags from these companies. In this case, be sure to ask for the report to make sure there aren’t any errors. You can also ask for a free report if you receive an “adverse action” notice, which the bank has to provide you if they turn you down.

Since a negative banking history may make it more challenging to open new accounts, it can also make it hard to build credit.

In the case of a loan payment, a bounced check is a bigger deal and could affect your main credit score. When your check bounces, it means that the transaction technically never went through. Unless you tried to pay early, that likely means you either missed a monthly payment or were late.

This unpaid balance could get you in trouble with a collection agency, which might report you to the credit bureaus. This is a fast track to lower credit scores.

Late payments will stay on your record for seven years, which can affect other loan eligibility and even insurance rates. Your top priority should be to get back on track with your original payment schedule.

Potential legal action against you

In addition to your credit score, debt collectors could mean bad news legally. Just like the recovery fees, each state determines the legal action you may face. You could be dealing with civil or criminal charges, ranging from a misdemeanor to a felony.

With civil charges, you’re in store for even more fees. (Remember that horrible cycle of being charged for having no money? It gets worse.) You might be able to avoid these charges if you can plead your case to the recipient before they file a lawsuit.

If you don’t reach them in time or they aren’t sympathetic to your situation, you’ll probably have to pay legal fees for yourself and them, as well as additional penalties.

In a criminal case, even higher fees might be in your future, along with a mark on your permanent record. In extreme cases, you might even go to jail. Usually, the amount of the check determines whether it is prosecuted as a misdemeanor or a felony. 

If someone is threatening you with criminal charges, be sure to seek legal counsel before things escalate.

Expert tip: Always negotiate fees

In some cases, banks (or merchants) may be willing to waive certain fees associated with bounced checks, especially if it’s a rare occurrence.

Contact them, explain the situation, and inquire about the possibility of fee waivers. Be gracious and understanding, even if they aren’t able to accommodate you this time.

Establishing a good rapport with your financial institution can lead to more favorable outcomes in lots of situations. Whether it’s waived fees, higher credit limits, or a better rate on a loan, it never hurts to get in touch and ask!

Steps to take if you bounce a check

Discovering that a check you wrote has bounced can be a stressful situation, but it’s essential to approach it with a proactive mindset.

In this section, we’ll outline practical steps to take if you find yourself in the unfortunate circumstance of having a check bounce. 

1. Contact the person you wrote the check to (and the bank) 

It may feel like an uphill battle, but you need to take fast action. Contact your bank and the payee (the person you gave the check to) as soon as you realize the check will bounce or has already. Make sure you’re all on the same page—that you’re going to make things right as quickly as possible.

2. Deposit funds as soon as possible

Deposit funds into your account as soon as you’re able. Decide if you can pull from a different account or even borrow from a loved one. Speed is key here. If you’re lucky, you’ll be able to deposit enough funds before the check officially bounces.

If you have multiple bank accounts at the same financial institution, you might also be able to arrange for your bank to pull money from your savings account in the case of insufficient funds in your checking account.

Note: An electronic transfer or check deposit might be immediate, or it could take days to hit your account. To be extra safe, bring cash to your bank branch in person.

3. Figure out what you’ll owe in fees

Next, figure out how much you’re going to owe in returned check fees. Work to bring your account current ASAP to avoid any additional fees.

While you’re at it, look into overdraft protection to avoid facing this situation again. With this protection, your bank will cover the amount of your bad check (up to a certain amount). Then, you’ll simply pay the overdraft fees to the bank, rather than suffering any additional processes or penalties.

The overdraft fees might even cost you less than bounced-check fees without protection, which you would possibly owe to retailers and your bank.

How to avoid having a bounced check

With technology speeding up the exchange of funds, you can no longer write a check and cross your fingers that the recipient will wait a few days to get to the bank. After all, they might just snap a picture from their phone to deposit it!

That said, if you realize after writing the check that you’re not in the clear, consider reaching out to the person or business and asking for a bit of a grace period. They may be willing to wait to process the check until you can refill your account with funds.

However, the best line of defense is good personal finance habits from the get-go. Here are a few tips that can help you avoid writing a bounced check in the first place.

Create a budget

Plan, then plan some more. Map out recurring expenses and income. Leave a cushion for unexpected costs. (You might not know the amounts and causes, but you can bet on something unforeseen popping up. Pencil that in.) Your budget is a useful framework to keep you in line with your priorities and means.

Build up your savings  

In your budget, consider how you can make room for savings. Every little bit helps and it adds up over time. Focus on building up your emergency fund and rainy day fund.

Your savings will help you avoid a crisis that sets you up for writing a bad check. It’s so reassuring to have money to fall back on when things go awry.

Balance your checkbook 

Keep your checkbook in check by setting money dates with yourself, and potentially your partner if you share bank accounts. Balancing your checkbook is especially important if you use a debit card or share an account with someone because your account balance may be different from when you last looked.

You need to have a handle on what’s going out and what’s coming in to see if your budget and savings are on track.

What happens if I deposit a check that bounces?

If someone else wrote you a check that bounces, it means the funds will never settle, or “clear,” in your account. 

The money might show up temporarily (depending on your bank’s procedures for pending deposits), but it will leave your account once the check officially bounces. Sometimes, the bank will also charge you a returned check fee or impose other penalties for depositing the bad check.

Your bank may notify you about the bounced check, but they are not required to. It’s important to monitor your own accounts to make sure the funds from a check clear in your account. This way, you can also protect yourself from spending money you don’t actually have (hello, overdrafts!).

Do you still get paid if a check bounces?

No, you won’t get paid if a check bounces. Since the money from a bounced check will never clear in your account, the person who wrote it will still owe you the money. They’ll need to send another payment—whether this is a new check or a different form of money transfer.

If you deposited a check that bounced, get in touch with the person who was trying to pay you. Hopefully, they’ll work with you to resolve it quickly. In a worst-case scenario where they refuse to reissue payment, you might have to pursue legal action.

Do bounced checks affect your credit?

What happens if a check bounces as far as your credit is concerned? Whether you were the payer or payee, can it ding your score?

The good news is, bounced checks themselves do not typically appear on credit reports. Credit bureaus primarily focus on credit-related activities such as loans, credit card payments, and debt collections. 

However, as we touched on earlier, the consequences of bounced checks can indirectly affect credit scores if they lead to a damaged banking relationship or other financial problems.

In extreme cases where a bounced check remains unresolved, the payee or the bank may take legal action to recover the funds. If the matter escalates to collections or court, your credit score can suffer significantly. 

To protect your credit, it’s crucial to address bounced checks as soon as you can.

Planning will help you avoid having a bounced check

Living within your means is important for your financial and mental health. So when times are tight, be extra sure you have the funds before writing a bad check. When your check bounces, it costs you more time, money, and energy in the long run.

Even if you work hard to avoid having non-sufficient funds in your account, accidents can happen. If a bounced check leaves your checkbook, don’t despair! Be proactive in handling the aftermath as quickly as possible, resolve the situation, and move forward with renewed confidence.

The post What Happens If You Have A Bounced Check? appeared first on Clever Girl Finance.

With all the resources online, it can be easy to overlook financial literacy books. However, books allow you time to reflect as you read.

Because they’re long-form, books are a great way to dive into topics you care about. That said, you can use some of the best finance books to achieve financial wellness. Check out this list!

We have put together a great list of personal finance books to help you get the knowledge you need. Additionally, these books will help women take control of their financial situations.

Financial literacy basics

Before we talk about the best books to help you, let’s discuss what is financial literacy.

Financial literacy is essentially is knowing how to make smart money choices and decisions. The more you know about money, the more you’ll feel confident and stable in your financial situation.

The three basics to practice for financial literacy are earning, saving, and growing. Earning involves simple money management, such as budgeting and debt management. Once those foundations are established, you can focus on other aspects, such as saving an building an emergency fund. Once you’ve built good savings, you can focus on growing your money through investments. 

While these concepts may be simple, much effort is required to navigate the different areas of financial literacy successfully. Fortunately, our list of books can help you learn and master new skills regarding your money.

Why reading financial literacy books is helpful

A basic understanding of financial literacy will set you on the right track for financial stability. However, if your long-term goals are to be more secure with your money and gain financial freedom, then books are necessary.

Financial literacy books go into the details, give examples, and better explain financial literacy concepts. In addition to providing helpful information, many books offer real-life insights and guidance from finance professionals. Books can help you humanize, simplify, and apply the different concepts of financial literacy.

23 Top financial literacy books

That said, here are 23 of the best financial literacy books you should check out. Note: These financial literacy books are linked via affiliate links that help us grow Clever Girl Finance! Please see our disclosures for more information.

1. Clever Girl Finance: Ditch Debt, Save Money, and Build Real Wealth by Bola Sokunbi

Clever Girl Finance’s Founder, Bola Sokunbi, has spent her career helping women achieve financial independence. In Clever Girl Finance, Sokunbi focuses on the three personal finance pillars money-savvy women must master.

Bola is a self-made money expert and finance influencer who shares real-world examples from her own life.

In addition, she also shares proven financial wellness processes. They include how women can leave debt behind, start saving, and invest in ways that build wealth for the rest of their lives. These ideas make it one of the best financial literacy books you can read.

The book aims to teach and empower women. It helps them identify their needs, challenges, and relationships with money. There are also stories from other women’s journeys that make financial security feel accessible.

2. Get a Financial Life: Personal Finance in Your Twenties and Thirties by Beth Kobliner

Written by financial journalist Beth Kobliner, the Get A Financial Life financial literacy book is for millennials wanting to explore their financial prowess.

Today’s young adults are faced with managing their money through societal challenges. We’re in the age of student loan debt and a nationwide housing crisis.

So Get A Financial Life gives concrete, actionable tips. The book promotes healthy financial habits that will benefit readers now and in the future.

3. Real Money Answers for Every Woman: How to Win the Money Game With or Without a Man by Patrice C. Washington

Patrice C. Washington draws from her own experience with student debt and overspending. She shares how women can dig themselves out of bad money habits in Real Money Answers.

Using a Q & A format, Washington covers how to truly own your finances. Additionally, she covers building credit, buying a home, and negotiating higher pay.

Whether readers are new to money management or need a financial reset, Washington’s advice shows how freedom comes with financial security

4. Broke Millennial: Stop Scraping By and Get Your Financial Life Together by Erin Lowry

Broke Millennial shows that being young doesn’t mean you have to be broke. It’s among the best financial literacy books for women who want to become better with money.

Erin Lowry writes in a relatable style that encourages action in readers. In fact, her philosophy is “Get Your Financial Life Together” (#GYFLT).

So beyond the budgeting and debt repayment basics, Erin dives into the mindset and a practical approach. For instance, if you’re planning a life with a partner and controlling your money habits in social situations.

5. On My Own Two Feet: A Modern Girl’s Guide to Personal Finance by Manisha Thakor and Sharon Kedar

Co-authored by Harvard Business School graduates and investment experts Manisha Thakor and Sharon Kedar, On My Own Two Feet provides a roadmap for money management.

Thakor and Kedar guide their readers through all the personal finance basics, from spending and saving habits to big-purchase goals and safeguards. With the aim of relieving money stress, this book is packed with useful advice.

6. You Are a Badass at Making Money: Master the Mindset of Wealth by Jen Sincero

Motivational writer Jen Sincero dedicated this book to the internal work needed to earn and grow the money you deserve. Therefore, it’s useful for entrepreneurs, freelancers, and women wanting to negotiate their salaries.

You Are A Badass focuses on the psychology of money. It identifies and addresses the barriers to earning that you’ve created in your own head.

In addition to humor and moxie, each chapter uses personal anecdotes of transformation. And there are self-reflection exercises for you to reach your earning potential.

The book is for anyone with a financial scarcity money mindset who wants to feel abundant with their money.

7. The 21-Day Financial Fast: Your Path to Financial Peace and Freedom by Michelle Singletary

This financial literacy book by Michelle Singletary is perfect to read if you need a clearly defined game plan for finance.

The 21-Day Financial Fast takes you through a three-week spending hiatus (except for essentials). In addition, it gives you time to address bad spending habits. Also, the book helps you create a plan for paying down debt and prepare for future expenses.

Michelle recognizes that money can be a source of stress and limitations. Consequently, this 21-day “fast” promotes financial peace and freedom.

8. Your Money or Your Life: 9 Steps to Transforming Your Relationship with Money and Achieving Financial Independence by Vicki Robin and Joe Dominguez

Vicki Robin and her co-author, Joe Dominguez, have sold over one million copies of this book.

Your Money Or Your Life teaches you to have agency over how you feel about and deal with money. You’ll work through a nine-step program. Robin explains everything from mindfulness and decluttering to side hustles and money conversations.

The book focuses on intentionality in your spending and investing. In addition, it explains how to make your money work for you and the world around you. So, much of the book’s content ties into Robin’s background in the sustainable living movement.

9. The Feminist Financial Handbook: A Modern Woman’s Guide to a Wealthy Life by Brynne Conroy

The Feminist Financial Handbook uses a feminist lens to approach personal finance.

We live in a society controlled by whoever can pay. Brynne Conroy argues that women can create a more fair world by building their own wealth.

It draws from stories of women of varying races, sexual orientations, abilities, and financial situations. Conroy provides motivation and resources to achieve personal success.

10. Quit Like a Millionaire: No Gimmicks, Luck, or Trust Fund Required by Kristy Shen and Bryce Leung

Quit Like A Millionaire was written by married couple Kristy Shen and Bryce Leung. It’s absolutely on the list of the best financial literacy books for wealth building. Both authors are champions of the FIRE (Financial Independence, Retire Early) movement.

Basically, this unique approach advocates for retiring at any age. You do this by spending less and investing. Shen uses a numbers-driven system that readers can adapt to live life on their own terms and grow rich.

In addition, you can do this away from day jobs and standard retirement savings. Find financial freedom with the money lessons in this book.

11. We Should All Be Millionaires: A Woman’s Guide to Earning More, Building Wealth, and Gaining Economic Power by Rachel Rodgers

We Should All Be Millionaires offers a powerful perspective on becoming rich. Rachel Rodgers shares ideas for earning more money. In addition, you’ll find advice for shifting your mindset about wealth.

Overall, it’s a refreshing look at why and how to be successful as a woman today.

12. Clever Girl Finance: Learn How Investing Works, Grow Your Money by Bola Sokunbi

Bola Sokunbi’s second book goes beyond everyday money management. Instead of focusing on budgeting and saving, it demystifies the investment world.

Likewise, it’s just as approachable as her first book. Learn How Investing Works guides novice investors to take action toward long-term financial gain.

Sokunbi also gives examples of the difference between making money and building wealth. In addition, she includes pitfalls to avoid and knowledge to use to become a successful investor.

Even on a modest salary, readers should feel confident enough to grow a nest egg for the future after reading this book.

13. The Black Girl’s Guide to Financial Freedom: Build Wealth, Retire Early, and Live the Life of Your Dreams by Paris Woods

If you are tired of feeling broke, The Black Girl’s Guide to Financial Freedom will help you craft a plan to build wealth. Based on the author, Paris Woods’s personal experience, it outlines a simple path to creating financial freedom for yourself.

After years of working in education, Woods figured out her wealth-building blueprint without changing careers. As a result, she wrote a book to show you how to do the same.

Although the focus is on Black women, this book will resonate with women of all ages, especially young professionals just starting their careers.

14. Women with Money: The Judgement-Free Guide to Creating the Joyful, Less Stressed, Purposeful (and, Yes, Rich) Life You Deserve by Jean Chatzky

In Women With Money, readers are encouraged to use money to build a more relaxed life that aligns with their values. It includes an organized system that helps you think through how you view money. In addition, you’ll learn to use your money to make strides toward the things you want most in life.

It features incredible research and sound advice. Jean Chatzky reminds us what money is really about.

15. Get Good with Money: Ten Simple Steps to Becoming Financially Whole by Tiffany Aliche

If you want to live your best money life but need a system to help you, this book is for you. Tiffany Aliche explains in a 10-step plan how to assess, organize, and control your money. In addition, she shares her own money mistakes and recipes for success.

Get Good With Money advises those new to finance. You’ll learn all the basics and the best way to structure your money.

16. Rich Dad Poor Dad: Rich Dad Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! by Robert T. Kiyosaki 

Author Robert T. Kiyosaki uses his book, Rich Dad, Poor Dad, to tell his life story about how he learned to manage money well and build wealth. Based on Kiyosaki’s experiences growing up with his real dad and his friend’s wealthy father, the book highlights different perspectives on acquiring wealth.

The book focuses on risk management, investing in assets, and the importance of learning. Since it was published 20 years ago, Rich Dad, Poor Dad has become the #1 book in personal finance.

17. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy by Thomas J. Stanley, Ph.D., and William D. Danko Ph.D

The Millionaire Next Door will help you re-evaluate your spending habits and look at wealth obtaining and retention in a new way. The books show how greed or the need to demonstrate wealth can lead to financial disparity.

Written by Thomas J. Stanley and William Danko, who help you to see the benefit of saving for the long run. While many people may think there are secrets to getting rich, The Millionaire Next Door shows you that being rich is more about managing your money well than having a lot of money.

18. Think and Grow Rich: The Landmark Bestseller Now Revised and Updated for the 21st Century By Napoleon Hill

Think and Grow Rich was published in 1937, and in its updated version, it shares the classic insights from the original version with newer information. Author Napoleon Hill spent 20 years interviewing wealthy and successful people and sharing their wisdom.

Still, one of the best finance books because it focuses on mindset, staying focused on your goals, and surrounding yourself with people who help you grow. The book isn’t as direct as other financial books but includes timeless lessons you can use throughout your life. 

19. I Will Teach You How to Be Rich by Ramit Sethi

Author Ramit Sethi teaches readers how to save money and have the freedom to spend money on desired things. This New York Times Bestseller will give you a realistic approach to saving money. 

Reading I Will Teach You How to Be Rich, will help you take responsibility for your current financial situation and confidently move forward. In addition, it’ll help you start investing with very little money. 

20. The Intelligent Investor Rev Ed.: The Definitive Book on Value Investing by Benjamin Graham and Jason Zweig 

Benjamin Graham is a wealthy and famous investor whose book will teach you how to invest and think like an investor. The Intelligent Investor focuses on essential aspects of investing, such as diversifying and knowing which stocks to invest in and which to avoid.

With the revised edition, you still get Graham’s advice but with commentary from journalist Jason Zweig on today’s market. The book benefits anyone looking to make investing a part of long-term financial plans. 

21. Money Out Loud: All the Financial Stuff No One Taught Us by Berna Anat

Author Berna Anat called herself the financial hype woman. In her relatable and practical book, Money Out Loud, she simplifies personal money management, making it less scary for the average person.

Anat breaks down how to successfully and efficiently create a budget. But what makes Anat’s book a page-turner is that she takes serious money topics and makes them fun. Her book also tackles significant issues, such as how the wealth system is designed to keep many people from reaching financial success.

It’s a book that will have you feeling inspired to use money in a way that can help make the world a better place.

22.  The Millionaire Fastlane: Crack the Code to Wealth and Live Rich for a Lifetime by MJ DeMarco

In MJ DeMarco’s book, The Millionaire Fastlane, he challenges conventional ways of obtaining wealth. He criticizes the traditional methods of relying on the stock market, relying on your savings or 401K to be rich. Ironically, he calls most conventional forms of wealth building the slow lane. This book emphasizes that if you continue on those paths, it’ll take years to acquire the wealth you desire.

Instead, DeMarco”s book introduces valuable insights into the different and faster ways of obtaining wealth. He helps readers reach their financial goals faster without sacrificing their free time or giving up buying Starbucks every day.

23. Money: Master the Game 7 Simple Steps to Financial Freedom by Tony Robbins

In his book, Money Master The Game, Tony Robbins takes financial advice straight from millionaires and shares it with average people. Over ten years of research was put into this book, along with the wisdom and guidance from wealthy professionals such as Warren Buffet, Ray Dalio, and Jacke Bogle.

The book includes the original transcripts to get the full knowledge and experience. In addition, Money helps you to create practical goals around your finances.

Expert tip: Read books related to your financial situation

While there are many bestselling financial books to choose from, it’s crucial you select the book that is right for you.

Consider your financial situation and the goals you want to achieve. Ask yourself which book will help you reach the success you desire. Just because a book is popular doesn’t mean it’s the right book for you.

What books do I need to read for financial literacy?

The best financial literacy books are often bestsellers, such as ” I’ll Teach You How to Be Rich,” ” Rich Dad, Poor Dad,” and our very own “Clever Girl Finance” book series.

In addition, the best financial literacy books should focus on different aspects of budgeting, saving money, money management, and investing. It’s best to choose books with practical advice and relatable content.

Where do I start with financial literacy?

The first step is understanding what financial literacy actually is. Reading the definition of the term is a great start, but to really understand, it’s best to read articles or watch videos on the topic. Once you understand what financial literacy is, you can start expanding your knowledge and applying what you learn by reading financial literacy books.

By reading financial literacy books, you gain a better understanding of the concept and are able to incorporate different elements of financial literacy into your life.

What are the 5 pillars of financial literacy?

The five pillars of financial literacy include earn, spend, save, borrow, and protect. Earn involves understanding how you make and understanding your gross vs. net income. Spending focuses on how you spend your money and is tied to budgeting. Saving focuses on saving money, such as having an emergency fund, a retirement, or a sinking fund.

Borrowing money is expected. Often, you borrow money for student loans or with credit cards. However, with financial literacy, you are paying attention to how much you are borrowing and making sure you are making regular payments on what you owe. Financial literacy helps you to borrow money in a responsible and manageable way.

Lastly, there is protection, which means you protect the money you’ve earned. Protection can look like monitoring your accounts regularly or having some insurance for your investments.

What is the best book to read on finance?

Determining which is the best book to read on finance can be tricky. While bestsellers such as our very own “Clever Girl Finance: Ditch Debt, Save Money And Build Real Wealth” are a great option, or classics such as “Think and Grow Rich” are also helpful, the best book to read on finance depends on different factors.

Overall, the best book gives practical advice that can be applied to your situations and has insights from professionals. Usually, books that successful people highly recommend are some of the best books to read on finance.

Related articles on financial literacy

• 10 Lessons To Learn From Everyday Millionaires
• How To Get Rich From Nothing!
• Rich Mindset Vs Poor Mindset: How to Develop a Rich Mindset!
• How To Become A Millionaire (It’s Simpler Than You Think!)
• 7 Financial Literacy Basics We All Need To Know

Start reading these top financial literacy books today!

Money management is different for every person because everyone’s lifestyles are different. Whether you are in your 20s with some debt or married and have an investment portfolio, it’s up to you to make an effort to succeed.

Fortunately, reading some of the best finance books and careful planning will help you reach financial freedom and independence.

Knowledge is the first step to taking charge of your journey. As you work on achieving financial wellness, consider joining the Clever Girl Finance book club and free financial courses.

The post The 23 Best Financial Literacy Books appeared first on Clever Girl Finance.

Are you looking for tips on how to declutter paperwork? You are in the right place! Individually, paper doesn’t take up a lot of space, but once you start accumulating more and more of it, it can begin to feel overwhelming.

Do you waste time searching through paper piles and old bills? Sorting paper, looking for that one document you need? If so, it’s probably time to declutter your paperwork and clear out your space.

Read on for our best strategies on how to declutter paperwork. This will help you eliminate the stress and overwhelm covering your kitchen table, filing cabinets, desks, and whatever other spaces in your home have turned into paper clutter zones.

What causes paper clutter?

Paper clutter is often caused by junk mail and paper statements, papers from your kids, school forms, pay stubs, recipes, paper coupons, or sentimental paper items. For example, if I sign up for paper mailing from my bank, then I’ll get a paper statement every month and end up with a pile of old bank statements.

In some cases it can be caused by feeling like you may need the information later on, only to add it to a pile that you promise to sort through later. But chances are when you think of sorting paper, you get overwhelmed and it continues to pile up.

Why is it important to declutter paperwork?

Decluttering your life has so many proven benefits. These benefits hold true for decluttering paperwork, too. The main benefit of sorting paper and documents is to your overall mental health and well-being and for your family’s benefit, in the case of an emergency.

Decluttering papers minimizes stress and improves your mental health

Not only does decluttering clear your mind, reduce stress, and improve focus, but it also gives you back your time.

How many instances have you wasted endless amounts of time searching for the one bill you were supposed to pay? Or your kid’s field trip permission slip? Or that wedding invitation you need to RSVP to?

Once you declutter and develop a system for maintaining a clutter-free state, you won’t have to worry about those stressful, time-wasting searches anymore. Your space and mind will be clear to focus on what’s actually important, not on looking for lost slips of paper.

Decluttering papers keeps your organized for your loved ones

While nobody likes to think of it, there may come a time when your loved ones will need to access your records on your behalf. People who are incapacitated or have passed away still have bills to pay and important documents in their names.

By decluttering papers, particularly your financial documents, you will make it so much easier for others to help you.

Just like how purchasing life insurance helps you put the right plans in place for your family, decluttering your paperwork can bring the same peace of mind.

Sorting your papers can put you at ease and help your loved ones deal with your important documents in the event of an emergency.

How to declutter paperwork and stay clutter-free in 7 steps

It’s time to begin learning how to declutter paperwork. We’re not talking about decluttering a stray paper here or there; we’re talking about getting rid of a lot! When you’re ready to get to work, here are the six steps to take to declutter paper:

1. Create a plan and make time to declutter paperwork

It might be tempting to declare that you are fed up with your paper mess once and for all and immediately start tossing paper.

That might get rid of the surface-level stuff, but it’s not a good long-term solution to decluttering papers. Instead, prepare before you begin the process. Preparation looks like this:

Gathering any tools you need

We recommend getting a paper shredder for sensitive documents like old bank statements and three cardboard boxes or file folders to separate your papers in (more on that next).

If you don’t want to buy a paper shredder, look into where you can take your sensitive documents, like a FedEx or local store that will shred them for you.

Setting aside the time in your schedule to go through everything

Sorting paper is best done in one fell swoop if your schedule allows. You might need an entire afternoon (or more), so intentionally choose a day where you can devote enough time to decluttering, so you don’t start and fail to finish.

 Get in the right mindset

Often overlooked, the right mindset is crucial for success when decluttering papers. You might think of paperwork as just old bills, but it’s so much more than that. Papers can be sentimental, too, and some of those things can be hard to let go of, such as old family recipes.

That’s why it’s essential to get in the right mindset to declutter before you begin. Prepare yourself for discarding things and letting go of the past.

A great way to start this is to get clear on your end goal. Perhaps it’s to have a calm workspace or more control and understanding of your finances.

Whatever it is for you, understand your underlying goals for decluttering and remind yourself of those goals while you’re going through the process. It will be so much easier to stay motivated and let go of what you no longer need if you have those goals top of mind.

And, remember, as the decluttering guru Marie Kondo writes, the goal when decluttering papers is to get rid of almost all of your paperwork.

While you will keep some paper, the default expectation should be that you will get rid of the majority of your paperwork when decluttering.

Going into the task with the expectation that you will discard almost everything is key to following through and keeping only what is truly necessary.

2. Gather all of your papers in one place

Now, you’re ready to sort some papers! First, gather every piece of paper you have. That means bills, receipts, cards, letters, artwork, loose sheets of paper, post-it notes, and anything else lying around.

Go through your junk drawer (you know you have at least one!) and your office and dig up every last bit of paper in your home. You’ll probably be surprised by just how much paper you have hiding around.

Once you’ve gathered everything up, spread out your paperwork on a large surface like a dining room table or even the floor if that’s the best space for you.

3. Sort your papers

Next, it’s time for the most time-consuming piece of the process: sorting paper. To declutter paper the right way, grab your three boxes or file folders and label them recycle, shred, and keep.

Recycle

Everything that’s trash, like expired coupons, recipes, paper coupons, school forms, and letters you’ve read and are ready to toss, goes into the recycle bin. If it’s not essential, you aren’t using it, and you don’t need it, then get rid of it. You can also create digital copies for items that you may need in the future or that you’d like to hold onto for sentimental reasons.

Shred

Anything with sensitive personal information, like your name, address, social security number, or account numbers, goes into the shred pile. That might include old bank statements, some school forms, and pay stubs. You’ll shred everything at the end, or will take that bin to a store to have it shredded for you.

Keep

Whatever you plan to save gets placed in the keep bin. If you’re doing it right, you won’t have that much to keep! And, you’ll have even less after you complete the next step of going digital.

Be sure to create a simple storage system where you can easily access these document. Also having an at-home safe is a good idea. (Note: This is an affiliate link, which means if you buy from it, we may earn a small commission which helps us grow! See our disclosures for more detail).

4. Declutter paperwork by going digital and paperless where possible

Once you have sorted your paperwork and have decided what to keep, determine what you need an original of and what you can digitalize. Anything you’d like to keep a copy of but don’t need the original of, you can scan and toss.

If you don’t own a scanner, head to a local copy store or FedEx and you can do it there. Once everything is scanned, be sure to label it properly so you can find it when needed and back up the files.

Going forward, there are many ways to limit the amount of paper that comes into your space. For one, you can sign up to receive electronic bills and can pay them online, instead of receiving and sending them in the mail.

This will greatly reduce the amount of paper that comes into your house, and the amount of paper you need to digitalize!

5. Choose and implement a storage strategy

Lastly, decide on a storage strategy for the papers you intend to keep. How you do this depends on what type of paperwork you have.

For example, some people have extensive medical files and need to keep their records easily accessible to take them to and from appointments. For them, it would be a good idea to create a medical binder to keep track of everything.

Most people have some important financial records that they would like to keep. If you are one of them, you might want to look into a filing cabinet with labeled file folders to store all of your essential financial paperwork, including things like wills, tax returns, and marriage or birth certificates.

Whatever works for you, save figuring it out for the end. Just don’t forget about it, or your recently decluttered paperwork might become a mess once again before you know it!

6. Choose a space for incoming paper

In my home, the biggest paper clutter culprit is mail. From catalogs to magazines to bills and everything in between, the paper can pile up in a matter of days. A simple solution I decided on was to choose a landing spot to drop off the mail and other odds and ends.

I find that if I keep this kind of paper clutter limited to one specific spot, I’m more likely to notice when it’s starting to pile up, and more likely to sort through it before it builds up.

7. Take care of paperwork immediately

Still getting paper bills? Instead of opening them, throwing them into a drawer, and forgetting about them, take care of them right away. When your child arrives home after school with new artwork?

Decide right then and there whether you want to place it on the fridge for display, scan it for posterity, or get rid of it (maybe after they go to bed!).

When you address your paperwork right when it enters your home, it’s less likely to build up and become a problem. Make sure to unsubscribe from services you don’t use, like magazines and catalogs and instead opt for digital copies.

Expert tip

When decluttering paperwork, only keep the documents you are absolutely need to use on a regular basis or that give you joy. If you’t use it, get rid of it. Leverage the “recycle”, “shred”, “keep” approach to help you as you go through your paperwork.

Questions to ask yourself while sorting paperwork

So, you’ve read the six steps outlining how to declutter paperwork and you’re ready to get to it. If you’ve ever tried decluttering before and stopped, it’s probably been because you hit a roadblock.

The most common problems people face while decluttering papers are the inability to decide whether to keep or toss something and having trouble getting rid of sentimental items. What’s a declutterer to do when they reach such an impasse?

The best way to move forward when you’re stuck is to ask yourself the following questions:

1. Will I need this information again?

Keep the paper in question only if your answer is a firm yes. If it’s a maybe and you still don’t want to get rid of it, scan it and then toss it.

2. Will I be able to get this information again if I get rid of it now?

If you can access the information again, either by reaching out to someone, pulling your records online or by any other manner, let it go. Chances are you won’t need it again, but if you do, you know you can get it.

3. Is this information still valuable to me?

This question helps the most when dealing with things like manuals or guides. Do you really need to keep outdated training materials from an old job? Probably not.

4. Do I have other similar things?

This is the best question to ask when sorting through sentimental items. Perhaps instead of keeping every picture your kid drew in third grade, choose your favorite and discard the others.

When you’re decluttering papers, what should you keep?

Before you start decluttering, it’s good to have an understanding of what documents to keep, what to shred, and what to recycle. Here are some guidelines you can follow:

What to toss vs. shred

You can safely toss anything that doesn’t include any personal information. Things like scrap paper, junk mail, catalogs, old receipts, product manuals that you can find online, and expired coupons can go right into the recycling bin. You should shred anything that has sensitive information.

What to shred vs. keep

So you’ve decided something is sensitive enough that you can’t just throw it away. How do you decide whether to shred something or keep it?

When it comes to deciding what to keep, probably the most important category of documents is your financial documents. Some documents, like a record of your paid-off mortgage, should be kept forever.

Others, like tax returns, should be kept for at least seven years. A good rule is that you should keep the record if the contract or matter is active. Otherwise, use your best judgment when deciding whether to shred it or save it.

How do you clean up years of paper clutter?

If you want to clean up years of paper clutter, be sure create time in your schedule. Then you can start by first organizing your paper by what to recycle, what to shred and what to keep. Make a pile of the paperwork you need to take action on, then another for paperwork you need to keep, another to shred, and a final pile to recycle. In general you should keep certain documents, like your tax returns, up to seven years, whether in paper or digital form.

How do I stop hoarding paperwork?

The best way for me to stop hoarding paperwork was to switch to paperless billing, statements, receipts and notices. Most places allow online bill pay and paperless statements.

Be sure to opt for digital receipts and statements to prevent the paperwork from piling up and prevent you from sorting paper later on.

What is the fastest way to declutter paperwork?

The fastest way to declutter paperwork is to throw out everything you don’t need. Only keep the most essential documents, like birth certificates and social security cards. Make sure to shred and recycle the rest. You can also scan documents that you may need in the future and keep them backed up on the cloud.

How can I store sentimental papers?

We recommend storing sentimental papers in a nice keepsake box or album or even make a scrapbook. Try storing them in a place that brings you joy, such as a coffee table or bookshelf where you can go through them often, rather than letting them collect dust.

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Now you know how to declutter paperwork. It’s your turn to get to work!

The bulk of decluttering paperwork can be done in a day. Once you’ve taken these steps to declutter, you’ll have a clearer space and mind.

You’ll probably never go back to a life full of paper clutter again! But, if you do, know that you can always take another day, address the chaos once again, and start over fresh.

As you learn how to declutter paperwork, also take the opportunity to find out more about how to simplify your finances and your home. We offer plenty of great articles to help you get organized with your money and your life.

The post 7 Steps To Declutter Paperwork Including Financial Documents appeared first on Clever Girl Finance.

Not all bank accounts are set up with your best interests in mind. Your current bank account might come with high monthly fees, present no interest-earning opportunities, or have a clumsy interface that makes it difficult to manage your funds. All of these are perfectly valid reasons why you might want to know how to close a bank account.

If you’ve decided to part ways with your current bank, closing down your account is an essential part of the process. With that in mind, we will explore how to close a bank account today. 

How to close a bank account

Closing a bank account should be a simple process. After all, it’s easy enough to open a bank account. Why shouldn’t it be easy to close it?

Speaking from personal experience, shutting down a bank account isn’t a simple one-click process. Instead, it takes several steps to close an account properly. 

If you are closing an account, below is a step-by-step guide to follow through the process. 

1. Transfer your funds to another bank account

The first step of the process is to move your funds over to another bank account. For some, this means moving your funds into an existing account in an effort to consolidate your financial life.

But for others, this means opening an entirely new bank account. This depends on your answer to the question, “How many bank accounts should I have?”

If selecting an entirely new bank account, take some time to find the right fit for your situation. You don’t want to get stuck switching bank accounts again anytime soon. A few things to look for include any account fees, minimum balance requirements, and also accessibility. 

When you have the new bank account set up, you can transfer your funds from the existing account into this new account. 

2. Move all recurring payments to a new bank account

Once all of your funds are transferred, it’s time to let everyone who sends you money know about the change. If you have any automated payments coming to your bank account, make sure the person paying you has your new bank account information. 

For example, you might need to change your recurring payment information from your investment account or if you get money from any unique side hustles. 

3. Update your direct deposit information

When finding out how to close a bank account, you still need to make sure you can get paid as usual.

If you are paid for the work you do by direct deposit, it’s critical to let your employer know about your new bank account. Usually, this part of the process is as simple as filling out a new form with your company’s Human Resources department. 

Other sources of directly deposited funds, like government benefits, will also need to know about this new bank account. If you aren’t sure who should get this information, comb through your bank statements to find out who deposits money into your account automatically. 

4. Update your direct debit information for any automated bills

You might be someone who has decided to automate your finances. If you take advantage of automatic payments for any of your bills, you’ll need to update the payment information with your new bank account. 

Start by making a list of all of your automatic payments. Then work through the list methodically to avoid missing a bill provider. 

Some common recurring payments to consider include mortgage payments, rent payments, student loan payments, credit card payments, streaming services, utility bills, insurance payments, and also car payments. 

5. Wait a full month

It’s easy to miss an automatic payment. Instead of moving forward with your account closure immediately, wait a full month to confirm that nothing has slipped through the cracks. 

During this month, monitor your original bank account for any transactions. If you forgot about a particular recurring payment, you’ll have the chance to update it. Also, make sure your paycheck hits the right account. 

Once all pending payments have cleared your account, you can move forward with closing your account confidently. 

6. File paperwork to close the account

Most banks require you to fill out a form in writing to close your account. Not only will you need to submit the written form, but you’ll likely need to sign the document.

In some cases, your bank will require you to sign the document in front of a notary. 

While some banks may allow you to close your account entirely online, others require you to make a visit to your local branch. 

7. Get a confirmation

When you submit the paperwork to close your bank account, ask a bank representative for a written document that confirms the account closure.

If the bank account pops up on your radar in the future, you’ll have proof that the account was closed with your permission. 

Expert tip

When it comes to closing a bank account, be prepared for stalling tactics. I went through the painful process of closing an account at a major bank. It wasn’t a smooth process. Although the bank tried to stall at every turn, I eventually got the account closed. 

As you navigate the process, be confident in your decision. Don’t let the bank try to sway you into staying. After all, there is a reason you are making this switch. 

Can you close a bank account online?

Some banks and financial institutions will allow you to close your bank account online. It might be as simple as submitting a form through your bank’s online platform. 

But other banks, specifically large institutions with a brick-and-mortar presence, are likely to require an in-person component to closing your account. 

Do you have to pay a fee for closing a bank account?

If you close your account within 90 days, you might encounter an early account closure fee. But in general, you shouldn’t expect to pay a fee for closing your bank account. 

If you are encountering a fee to close your bank account, it’s further proof that it’s time to part ways with your bank. Working with a bank that nickels and dimes you at every turn usually isn’t a good move for your financial situation. 

What to do before closing your account?

If you’ve decided to close your bank account, evaluate why you want to make a switch. Simplifying your finances is a very valid reason. But if you only have one bank account, ask yourself why you don’t like the one you currently have.

Maybe you don’t like the high fee structure. Or perhaps you want to tap into higher APYS. Whatever your reason, look for a bank that presents a solution in your new bank account. 

Is there a negative to closing a bank account?

The process of closing your account might not be enjoyable. But the end result is usually very positive.

You’ll walk away from a potentially fee-riddled account. And you’ll hopefully step into a new bank account that offers you more bang for your buck. 

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Understanding how to close a bank account can help you with your money!

It’s possible to close your bank account in a few simple steps. Tackle each step with patience to move through the process with the best results.

While it’s not a process you can complete in one click, it’s still worth pursuing if you want to switch up your banking situation. As you move forward, carefully research your other banking options.

When you find a bank account that suits your needs, initiate the closing process on your current account. Doing this will help you to experience greater financial wellness and also keep your financial house in order.

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Learning fun facts about money is a great way to get more interested in your finances. Plus, they’re fun to share with friends! So if you're curious about some of the lesser-known aspects of those dollar bills you carry around in your wallet, read on for 21 fun money facts!

6 Money facts about coins

First up, let’s cover some interesting facts about money. Particularly, all those loose coins buried between the couch cushions.

1. It costs more money to make pennies and nickels than they're actually worth!

It costs the U.S. Mint about 2.10 cents to produce one penny and about 8.52 cents to make one nickel. This is primarily due to the price of copper and nickel — which have both gotten more expensive over time.

This leads many lawmakers to question whether it’s time to retire some small-value coins from circulation. What do you think?

2. Coins stay in circulation for about 30 years before they get melted down and repurposed

This is one of the best money facts for those that love repurposing things! After about 30 years, coins become too worn down and tarnished to stay in circulation. So the Federal Reserve melts them down and repurposes them.

But warning — it’s illegal for anyone besides the U.S. government to melt coins. So this is one thing you can't upcycle yourself, but still pretty cool to know.

3. Two separate agencies create coins and paper money!

When you think of creating money, your mind may go straight to the U.S. Mint. But in reality, the U.S. Mint only makes coins (think pennies, nickels, dimes, and quarters). The Bureau of Engraving and Printing (BEP) is actually the agency that makes paper money.

4. Congress creates “coin programs” to encourage families to collect coins

Do you remember when state quarters were released in the early 2000s? As a kid, I loved rummaging through my mom's quarters to see which states I could find.

Turns out, Congress creates certain coin programs — such as the 50 State Quarters Program — to try to encourage individuals to collect coins.

One of the most recent programs is the American Women Quarters program. It features the faces of Maya Angelou, Sally Ride, Anna May Wong, and other women who have had a profound impact on American history.

5. Nickels weren’t always made of nickel

During WWII, the government actually reserved nickel for war efforts. As a result, nickel coins were made out of alternative metals like copper, manganese, and silver.

In other words, the nickel we know and love today was completely nickel-less. How’s that for a fun fact about money?

6. Nickels used to be half the size of a dime

The first five-cent coins to ever enter circulation in the U.S. were called “half dimes.” They were worth half as much as a dime, and as such, were also made with half as much silver.

But this had one major problem: these five-cent coins were super small and easy to lose. Indeed, they were half the size of a regular dime.

So, they got an upgrade in 1866 when the Mint Director at the time, James Pollock, recommended they be made out of nickel instead. This resulted in a larger (and cheaper) coin that was harder to lose.

9 Money facts about physical bills

Now that you know some fun facts about money — particularly coins — let’s dive into some money facts about banknotes, dolla' bills, benjis, or whatever else you want to call them!

1. Physical money doesn’t last forever

We’ve all come across a torn and tattered dollar bill. But did you know that paper money actually has an average lifespan? — just like humans!

Here are some interesting facts about money and its lifespan:

• A $100 bill lasts about 22.9 years.
• A $50 bill lasts 12.2 years.
• A $20 lasts 7.8 years.
• A $10 bill lasts 5.3 years.
• A $5 lasts about 4.7 years.
• A $1 bill lasts about 6.6 years.

Turns out, we use $5 bills the most in transactions, which is why they have the smallest lifespan. We handle $100 bills the least, which is why they have the longest lifespan.

2. A Massachusetts-based firm manufactures all currency paper

Since 1879, Crane Currency, a Massachusetts-based firm, has made the currency paper the United States Bureau of Engraving and Printing uses to make banknotes. Can you imagine being the only company in the U.S. that makes our nation’s currency paper? One word: Fancy!

3. There is no such thing as “paper” money

Here’s another fun fact about money — Federal Reserve notes are actually made of 25% linen and 75% cotton, not paper!

Bills of $5 or more also have watermarks and tiny red and blue synthetic fibers of various lengths evenly distributed throughout the paper to make it more difficult to counterfeit. These are also known as "security threads."

4. It takes a lot of willpower to rip a banknote

If you wanted to rip a banknote (which I’m not sure why you would) you’d need to make 4,000 double folds forward and backward. Who has that kind of time?! Still, it’s one of many fun facts about money you may not know.

5. All paper bills weigh one gram each

A typical banknote weighs 1 gram each, regardless of whether it's a $1 bill, a $50 bill, or a $100 bill. Because there are 454 grams in one pound, this means there are 454 notes in one pound of money.

Likewise, a literal “ton of money” would be made up of 907,185 dollar bills!

6. If you stacked money one mile high in the air, it would contain more than 14.7 million banknotes.

An average banknote is 0.0043 inches thick, and there are 63,360 inches in a mile. So if you wanted to stack dollar bills one-mile high into the sky, you’d need more than 14.7 million dollar bills to make it happen (63,360 / 0.0043).

7. Most U.S. currency isn’t even in the U.S.

Here’s an interesting fact about money that’ll leave you scratching your head…

According to authorities, between one-half and two-thirds of the value of all U.S. currency in circulation is outside the United States. This is mostly due to the fact that the U.S. dollar is the world’s primary reserve currency.

So as a result, several nations use it for international trade and cash reserves.

8. There used to be a $100,000 bill!

This is one of our favorite fun facts about money! In 1934, the U.S. created a $100,000 bill, also known as a $100,000 Gold Certificate. While it’s technically the largest banknote the government ever issued, it was never meant for public use.

Instead, Federal Reserve Bank branches used them for large inter-bank transactions. But still. Can you imagine what you’d do if you found a $100,000 bill on the sidewalk? My gawd.

9. $2 bills aren’t as rare as you think

If you’re like me, you may think $2 bills are pretty rare. But in reality, there are still more than 1.4 billion $2 bills in circulation as of 2020. That’s billion… with a B.

For comparison, there are:

• 13.1 $1 bills in circulation
• 3.2 billion $5 bills in circulation
• 2.3 billion $10 bills in circulation
• 11.7 billion $20 bills in circulation
• 2.3 billion $50 bills in circulation
• 16.4 billion $100 bills in circulation

6 Money facts about consumer debt and spending

This next list isn’t necessarily fun — but it does show some interesting facts about money, consumer debt, and spending you may not know.

And if you’re currently in the thick of paying off debt or trying to budget, reading these statistics can help see where you fall against the average.

1. The average house costs $348,853 in the U.S.

That's according to recent Zillow research. But averages actually vary wildly from city to city.

For instance, San Jose has the most expensive housing in the U.S. The average house sales for $1.06 million. Paullina, Iowa has some of the cheapest housing, with the average home costing just $147,800.

This kind of makes you wonder which is best, renting or buying?

2. The average student loan borrower has $37,693 in federal and private debt.

But racial disparities exist. The average Black student has $57,770 in student loan debt while the average White borrower has $30,520. More specifically, Black women have the highest average student loan debt than any other demographic.

In fact, many Black women face a full-on student debt crisis, which is why financial success is essential for women of color.

3. Consumer debt has grown due to the COVID-19 pandemic

There’s now $800 billion more in collective consumer debt in the U.S. than there was pre-coronavirus pandemic. Student loan debt saw the largest increase, followed by mortgage debt and personal loan debt.

On the flipside, overall credit card debt actually decreased during the pandemic.

4. The average salary in the U.S. is $58,260.

According to the Bureau of Labor Statistics, the average person makes $58,260 a year in the U.S. That breaks down to around $28.01 an hour.

But here’s where the money facts get interesting…

Cardiologists make the highest average salary in the U.S., bringing home around $252,970 a year. The lowest recorded wage is for shampooers and fast food workers, which both make around $25,000.

No matter where you fall on the list, here are eight simple ways you can increase your income.

5. The average family spends $609.75 per month on groceries and dining out

Ask anyone what part of their budget they’re trying to trim back on, and 9 times out of 10, they’ll say FOOD! It seems like everyone is spending way more on food than they want (and inflation doesn’t help).

Each year, the average family spends $4,942 on groceries and $2,375 on dining out, according to recent data from the Bureau of Labor Statistics. This breaks down to $609.75 each month — just on food.

If you’re trying to cut down your grocery budget, try out some of these 35 delicious frugal meals next time you hit up the grocery store. Or, weave some of the 25 best cheapest meals into your weekly food routine.

6. Contrary to popular belief, money can buy happiness

There’s a lot of debate out there as to whether money can buy happiness. But here’s a fun fact about money for you — it actually can, in certain situations.

While it’s true money can’t buy you relationships or fix all your problems, it can…

• Reduce your stress (which can, in turn, improve your relationship with your partner and lower your chances of divorce)
• Buy you time to spend with the people you love
• Buy experiences (which, in turn, bring you more happiness than physical things)

So in short, money can buy happiness — if you spend it collecting moments that align with your values and goals — rather than on possessions that may lay in a corner collecting dust.

Hope you enjoyed these interesting and fun money facts!

These are definitely some fun and interesting facts about money! Increasing your knowledge about money can help you appreciate it and use it wisely.

Whether you’re trying to master your student loans, create a budget that works for you, or buy your first home, we’re here to help you every step of the way! Sign up for one of Clever Girl Finance’s 100% free courses to get the direction and support you need to reach all your financial goals.

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