Being informed about your finances is the key to a healthy bank account, but with all the money-related terms out there, talking about it can sometimes feel like a foreign language. Here are a few important tips to learn the lingo on the steps to personal finance success, starting with just A, B, C.
A is for: Assess Your Net Worth
Think of your net worth as your personal financial snapshot— the grand total of your assets minus your liabilities. Assets include any money you have in bank accounts or investments, while liabilities can range from credit card debt to student loans. Determining this is important for many reasons, but perhaps most importantly, to help determine your debt-to-income ratio. Having a “good” debt-to-income ratio is a must when taking the step on those big, milestone purchases -- like purchasing a home.
B is for: Build a Relationship With Your Bank
Your bank should be more than a place to withdraw and deposit your money; it should be a financial partner—starting with something as simple as your checking account. When deciding on an account, ask yourself questions like: Are you paying additional fees for making an in-person transaction through a teller? Do you prefer mobile banking or need access to a branch? Look for a bank with an extended network of ATMs and mobile banking, allowing you quick and easy access to your money. Ultimately, your bank should fit your lifestyle.
Building a relationship with your bank through the various stages in your life ultimately leads to benefits when you’re ready to apply for a mortgage or open an individual retirement account.
C is for: Caring For Your Credit
Your credit score is the key to opening almost every door for a major investment; it’s used to evaluate your eligibility for a mortgage and interest rates for credit cards. Take care of your credit by annually checking your score (to make sure there are no errors) and pay your bill on time, always. (Late payments can lower your score.)
No matter the situation, don’t be afraid to ask questions. Your bank should make you feel valued and empower you to make informed decisions, offering easy-to-understand tools.
Roxanne Vivanco is a Community Development Loan Officer at TD Bank.