Banking Basics

The following is a transcript for the video:

Um, Betsy, what are you doing?

We're diving into financial basics today, right?

Huh huh, a little visual pun for our viewers. They love this stuff.

Okay, cringe. Hey, this is the first I'm hearing about this. Okay, come on, does anyone want to co-host? Please let me know in the comments!

Let's get started on some financial basics while these two work on their stage act. Here comes the first and easiest: free credit reports. You're entitled to one of these per year from each of the credit bureaus. A good place to review yours is creditkarma.com, where you can get your latest scores and report anything fishy.

Why should you care about your credit score? Because there could be wrong or even false information on your report, causing a drop in your score like a red herring.

Save for retirement as early as possible. Most 20-somethings aren't concerned about that, but the sooner you start, the better the return when you hit that magical golden age. If you've never looked into a 401k, now is the time! Check with your employer to see if you can contribute and if they match! If they do, contribute up to that amount to get the match – if it works for your budget. Don't think you earn enough to contribute; any amount helps! Remember, you have another 30 to 40 years of saving to go. What you put in now will grow and help you finish strong. If you don't have access to a 401k, open an IRA. Anyone can open one, and you don't need an employer to make that happen.

Credit cards don't equal free money. One of the biggest mistakes young adults make is how they use their credit cards. They think it's essentially free money, but that's not how it works. Leaving a balance on your credit card means interest accrues, so you end up paying more for what you bought and making your credit score flounder. If you can pay your balance in full every month, especially if you have a rewards card, that's ideal. If you can't, that's a good sign you need to change your buying habits.

Next, track your spending. Yeah, yeah, we've been talking about budgeting in a lot of our episodes, and it's harder for some to get started, especially when you're in your 20s. Most people aren't aware of where their money is going. By tracking, you can figure out where the leaks are and control your expenses. No fish puns this time, but here's an episode we did on budgeting apps worth a look.

Pay off loan debt. A lot of diplomas go hand-in-hand with student loan balances. It's easy to start paying the minimum and never look at it again, same goes for credit cards. That's not against the rules, but it's better to charge within your means. Exactly! Your statement says $100 is due, so you pay a hundred dollars now. There are strategies here for paying down debt so you can get to this point. Two popular methods are the debt snowball and debt avalanche.

The debt snowball method means you pay off debts starting with the smallest balance and ending with the largest. Once a balance is paid off, you roll the payment you were originally making into the next payment. So, if your first debt requires fifty dollars per month and your second debt requires a hundred dollars, you pay a hundred and fifty dollars on that second debt.

The debt avalanche method pays off your debt from the highest to the lowest interest rate. Mathematically, this strategy makes the most sense as you'll save money and interest over the course of paying off your debt. However, it can take longer, so some choose the snowball method. Either works, so figure out which one works best for you.

Don't play "keeping up with the Joneses." There are no winners in this game. Exactly! A little pep talk from the bells here: you don't need to waste money trying to impress or outdo someone else. If they don't want to be seen with you because you don't have the latest and best, well, you might just want to be friends with someone else! Oh, that one was smooth, not even mad, very impressed!

It's important to build a good support group of friends and family who understand your financial goals and want to see you succeed. Otherwise, you fail before you even begin.

Finally, focus on reducing your biggest expenses. Obvious, right? This is good advice for any stage in life. Your three biggest expenses as a young adult are most likely housing, transportation, and food.

For housing, it's easier to find a cheaper place to live when you're young. You can split rent with roommates in a house or apartment, or if they're okay with it, stay with your parents a little longer and save up. Depending on where you live, it might be cheaper to take public transportation or find a place to live that's close to work so you can walk or bike, weather permitting. The savings on car repairs, insurance, gas, and parking can be huge! If those aren't options, carpool with co-workers or look into a fuel-efficient car.

Food is the easiest expense to slash. Plan your meals, shop sales, use coupons, get a loyalty card, buy in bulk, and don't shop when you're hungry. (We've all been there!) Keep educating yourself – your financial needs will change, and your approach should evolve to match them.

That's it! Holy mackerel, tuna in next time! I am so proud of you girls! See you later.