This Financial Literacy Month, we’d like to explore additional topics beyond budgeting. The path to financial success is unique for everyone. At the same time, there’s a good chance that everyone will need some financial savvy to pursue their goals.

Whether you’re just starting or considering your next big move, having a handle on your finances will be of utmost importance. Here are a few topics that can enhance your understanding of financial literacy.

Understand the Differences Between Good and Bad Debt

Conventional wisdom tends to have a bias against having debts. After all, owing money means you have fewer resources to invest in the things you want to pursue.

At the same time, there is such a thing as using debt to your advantage, such as improving your credit score to finance a car or house. It’s crucial to remember that there is a difference between good debt and bad debt. NerdWallet has a great write-up on distinguishing between the two.

Good debt can help you increase your income or net worth. Examples include:

• Using a student loan to gain credentials and expand your skillset
• Taking out a home improvement loan to increase the value of your property
• Signing up for a credit card (and using it sensibly) to build credit history
  

Bad debt is any debt that may worsen a financial situation. We are referring to situations where repayment may actively hinder you from pursuing your financial goals—or even prevent you from paying for everyday expenses. Bad debt may also eat into your savings. Examples include:

• Using a high-interest credit card and only making minimum payments
• Taking out a loan for discretionary expenses
• Signing up for a payday loan
  

Always remember that taking on too many debts, regardless of the intention, can quickly turn into bad debt. Avoid getting caught in a situation where you are spending beyond your means.

Many financial institutions offer loan calculators that allow you to determine how taking on new debt might impact your budget. Use these when considering a car loan or mortgage.

Prepare for the Additional Costs of Financing a “Big” Purchase

In the popular imagination, a “big purchase” is often seen as an indicator of financial success and stability. Buying a car or a house are two of the most well-known examples of a big purchase.

Indeed, securing financing for these types of items demonstrates commitment, dedication, and an investment in the future. At the same time, there is an emphasis on one factor in this equation. That is, financing a car or house is a commitment.

Your financial obligations for these items don’t just end with making the monthly payment on your loans. On the contrary, there are many (not so) hidden costs associated with maintaining the condition of these big-ticket items.

Automobile ownership, for instance, will require additional out-of-pocket expenses that require budgeting. There are regular purchases you’ll have to consider, like:

• Cost of gasoline
• Maintenance and repair costs
• Replacement of tires and major components
• Routine inspections and oil changes
• Insurance and registration
  

Homeownership has similar commitments. Even if you shop carefully to avoid a money pit, you’ll still be on the hook for many other expenses. From regular maintenance to periodic upgrades, there will be many items that will require a combination of saving, budgeting, and financing:

• Home repairs and maintenance
• Pest control and lawn care costs
• Major remodeling projects
• HVAC and insulation upgrades
• Roofing and flooring replacement
• Property taxes, insurance, and HOA fees
  

As you can see, big purchases also come with a significant amount of responsibility, which will ultimately require some financial fine-tuning.

Regardless, be proud when you’ve met a down payment goal! After you reach that milestone, it’s time to determine the best time to apply for financing.

Assess your needs and be prepared to make compromises. Getting a reality check now will help minimize the risk of encountering costly surprises later.

Appreciate the Value of Financial Planning

We all have plans for things like the holidays, the weekend, and even today’s lunch. Of course, there’s always value in thinking a bit further ahead. In other words, it is worthwhile to think about your future in terms of years, even decades, in advance.

Think about the following:

• When do you want to retire?
• What kind of lifestyle do you envision for yourself in retirement?
• How might financing a home affect your budget?
• What are your options for consolidating credit card debt?
• Do you have a plan in place in case something happens to you?
  

These and many more questions might require a second opinion, especially if money is involved. In such instances, we recommend scheduling a meeting with a financial planner.

A financial planner is an experienced professional who can offer insights into your finances. Discussing money can be a sensitive matter, so consulting a professional can provide perspective on your financial future.

Financial planners can do more than discuss retirement. You can also meet with them to discuss any significant life changes that may impact your finances, such as career transitions or receiving an inheritance.

Financial Literacy Month is an opportunity for you to assess your financial situation and track your progress. Of course, financial wellness is a year-round commitment. When it’s time to make big money moves in your life, it pays to work with a trusted financial institution.

First Florida empowers you to pursue your financial goals. Explore our website to discover how you can chart a bright future.