7 Common Financial Knowledge That You Should Know

What are the most important financial facts everyone should know? Here’s a list of 

Information for you to understand.

1. How much should you be saving by the age of 30?

 By the age of 30, you should be saving at least $11,800 to keep up with the average 401(k) Balance.

According to a 2019 Vanguard analysis, the average 401(k) balance is $92,148, 

Based on age, the breakdown of the average 401(k) for the Americans is as follows:

Ages 20 to 29: $11,800

From age 30 to 39: $42,400

Ages 40 to 49: $102,700

50 to 59 years: $174,100

Above 60: $195,500

2.How to buy your first house?

More than 2/3 of all American’s home buyers do their purchase through mortgages. 

The average mortgage debt in the US is $202,284, while the average cost for a home is $234,500.

The appreciation rate of the US real estate has gone up in the past decade, but the wage level has remained stagnant. 

If you have the capacity to save about 20% down payment within 5 years, then it might be not a bad choice to go for mortgage.

3.Set aside at least $1,000 for emergency.

About 67% of people in the US have a hard time paying a $1,000 emergency bill.

Apart from saving a $1,000 for emergency, experts recommend at least three to six months of living expenses for a secure financial fund. 

This includes the cost of living, and whether or not you have affordable health insurance.

4.Compound Interest

Befriend with time. The power of compound interest is the best-kept secret. The one thing young people have advantage over others is time.

If you invested $10,000 which compounded annually at 5%, it would be worth over $40,000 after 30 years, accruing over $30,000 in compounded interest.

It’s an upward spiral you should have for life.

5.Keep a budget.

Budgeting is important to manage your expenses and avoid going broke.

The key is to differentiate needs and wants. Lower down on the ‘wants’, and 

keep track of how much you earn and spend. Leave enough for necessities. 

You don’t have to be good at math to do budgeting, and it doesn't mean you can't buy the things you want. It just means that you have better plan on your money, and you'll have greater control over your finances.

6.How to improve your credit rating? 

What most people don’t know is the importance of credit scores and what can a great credit history can do.

Your credit score indicates your financial health. With a decent score, it’s easier to buy a house, get a car or do your own business.

The most important thing you can to do to build your credit score is to pay every bill on time every single time.

7.Insurance 

Insurance is a way of protecting yourself and your family from a financial loss.

A term life insurance is what you can get for the ones who are financially dependent on you. In addition to life insurance, you should also get insurances on your assets like your car, home, and health.

You might also get umbrella insurances if you’re at risk for being sued for property damage or other people’s injuries.