financial know-how Archives - DIYmoneytrack.com

Am I on track? Use these 5 personal finance ratios to find out

As a young adult, you’re at the early stages of your financial journey through life. You may be thinking about saving for a down payment, paying off student loans, or maybe even planning that dream vacation.

But how do you know if you’re truly on track? This is where personal finance ratios come in – they’re like your financial GPS, giving you a quick snapshot of your financial health and helping you make informed decisions.

There are 5 essential ratios that you should know, and track regularly over time. These ratios give you a well-rounded view of your financial stability and highlight areas for improvement, such as reducing debt, increasing savings, or building investments. If you are already following your money, then calculating these ratios on a regular bases will be straightforward.

To learn more about the 5 personal finance ratios and how to calculate, please read on.

When you need umbrella insurance

About ten years ago, my wife got into a car accident and the driver of the other car made a very large claim against us and our auto insurer. The claim amount initially exceeded the liability limit of our policy. We were notified by our insurer that we should consider hiring a lawyer to fight the amount of the claim above the policy limits. Ultimately, the claimant settled with our insurer for an amount within our liability amount, otherwise we would have needed to get directly involved legally.

After this unsettling incident, we decided to increase the protection of our assets with an umbrella insurance policy. Umbrella insurance provides an extra layer of protection on top of your existing insurance policies (like auto or home insurance). It helps cover costs if you’re sued and the damages exceed the limits of those other policies, protecting your assets.

If you are interested in learning when you may need an umbrella policy and how to determine coverage needs, please read on.

Why being financially literate may only take you so far

I’m sure you’ve heard of financial literacy. It is a major focus of the media, academic and financial institutions, and has its own month (April). You may have also taken a class on the subject. Despite all the attention, financial literacy has been declining since 2020, according to a TIAA Institute-GFLEC report.

This is concerning, because even being financially literate may only take you so far. To be a skilled money manager and increase the likelihood of achieving your financial goals comfortably, you need to strive for financial proficiency.

What’s the difference? Financial literacy is the knowledge of fundamental concepts and principles of personal finance. Being financially proficient refers to the application of that knowledge (literacy) to achieve positive financial outcomes.

Unfortunately, considering recent statistics about the state of financial literacy worldwide, the foundation for building proficiency is still weak for many individuals and families. Moreover, even if you exhibit a high level of financial literacy, this does not mean you are financially proficient.

If you are interested in learning more about financial proficiency and 3 steps you can take to progress from literacy to proficiency, then please read on.

How do you compare to the wealthiest U.S. households?

What do the wealthiest households own that separates them from others?

The answer to that question can be found in research data from the Federal Reserve on the distribution of U.S. household financial accounts.

This data allows you to compare the level, composition, and share of assets and liabilities with households in other wealth percentile groups, and see what the wealthiest households buy and own that makes them different.

If you are interested in learning what assets are prioritized by the wealthiest households and how you compare, please read on.

2024 Year in Review

Happy New Year! Wishing everyone a healthy and prosperous 2025.

Thank you for continuing to support my efforts to increase personal financial proficiency and well-being.

I believe strongly in the financial and emotional value of the content I produce and it gives me great pleasure when I hear and see it helping others.

I created DIYmoneytrack.com to support the content in my books, obtain feedback from readers about new content, and connect with other DIY financiers.

I’m delighted to report that my mission continues to gain traction.

How to protect your credit reports

In my prior post on protecting yourself from cybercriminals, I shared steps you can take to stay ahead of fraudsters trying to use your personal data against you and steal your identity. While all of those actions should be used to protect yourself, there is one action I recommend you consider implementing now:

Create a fraud alert or freeze access to your credit reports.

How to minimize fees to maximize your big money returns

As referenced in my new book Making Big Money Decisions and recent blog posts, transaction fees can take a big bite out of your returns. The good news is that the costs for holding investment funds and selling a house in the USA continue to decline, allowing you to keep more of your money. Since these investments are usually large, even small differences in the fees you pay can add up to significant amounts of money over time.

If you are interested in finding out more about these transactions costs and tips for ensuring you are paying the lowest fees, then please read on.

You don’t need a budget to manage spending

60% of people don’t use budgets to manage spending, according to the 2017 Consumer Financial Literacy Survey from The National Foundation for Credit Counseling. While that number may be surprising, what is more shocking is that this number has not changed much since the 2007 survey. For all the advances in technology, including spreadsheets and online budgeting software, people’s habits related to managing money and tracking spending have not really changed that much over the last decade. Continue reading “You don’t need a budget to manage spending”

Buying a vehicle? Check the TCO

If you are in the market for a new or used vehicle, then it is important to do some homework before you settle on make and model. Here are a few things to consider before you pull the trigger on buying that new or used vehicle: Continue reading “Buying a vehicle? Check the TCO”

Don’t pay to manage your credit score

I was asked earlier this week what’s the best way to check a credit score? There are a few ways to get your credit score, but check to see what your credit card company offers first. Many credit card issuers now provide cardholders with their credit score as a free benefit. The card issuer I use provides my FICO® score, score history, key factors affecting my score, and suggestions on how to improve my score. Continue reading “Don’t pay to manage your credit score”