National Bureau of Economic Research

There is more bad news according to a recent survey done by the National Bureau of Economic Research. The survey, called “Financial Literacy among the Young” showed less than 33% of 20 to 30 year olds had a basic knowledge of interest rates, controlling investment risk, or inflation. The survey indicated people are willing to learn, but don’t know some of the most basic financial issues.

If you count yourself as one of the millions of Americans who has a lot to learn in terms of finances, then do your own research. We got some tips for financial management for you. A basic understanding of each could make a huge difference in your future economic health.

Your budget is key

You may be tired of hearing about the budget, but the budget is Number One when it comes to finances. You have to know how much money you bring in, how much you put out, and the surplus or deficiency that generates every month. It’s easiest to write everything down in a notebook or find software that can help. Mint.com is a website where you can keep track of your own budget. Once you figure out whether or not you have a surplus or deficit at the end of your accounting period, you can start cutting back on unnecessary expenditures.

Build up savings

Your parents were right: Cash is king. Parents in generations past knew you had to put money aside. Along the way, we forgot the value of saving, and though debt was the best idea. We started spending more than we really had. How do you fix that? Start saving, just like generations past did. The best thing to do is take a percentage out of your paycheck and set it away before spend money on anything else.

It’s not always wise to use credit

Credit-card debt is a huge expense for a lot of families, and it can cause enormous problems. The best thing to do is have credit cards, but use them only occasionally for small purchases. Pay them off right away, as you don’t want those hyenas to get their hooks in you. Costs of credit are FAR too much to have any kind of balance for long. You might have a low interest rate, but you’re paying more than you would if you’d have used cash.

Plan for retirement

The Roth IRA is a great retirement-planning tool. It’s flexible, and best of all, tax free. Typically, a lot of workplaces have an IRA available, and take advantage if your company offers matching contributions. If your company doesn’t match your IRA, then stay with your own Roth IRA.

Insure yourself

For anyone with young children or other dependents, life insurance is a necessity. A general rule of thumb is to have enough life insurance to cover eight to ten times your current annual income. That may sound like a lot, but it isn’t. Once you die, your loved ones, especially young children, will need money to sustain themselves. If you make $ 80,000 a year, for example, you should buy $ 800,000 of coverage. If your family has to live on that money for 15 years before they are old enough to manage by themselves, that’s only $ 53,333 a year.

Managing finances wisely

If we’ve learned just one thing from this recession, it is that wise decisions are key to surviving a tumultuous economic market. Although things are on the upswing right now, that doesn’t mean that things are back to normal. People who were mired in debt before the recession hit don’t have the luxury of waiting to sort out their finances. It’s better to get to hard task of analyzing your spending, and changing them right away. Your future, at least financially, hinges on it.