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Americans with lower levels of financial literacy don’t just risk losing out on money they may not know they’re missing. Research shows they could be paying with their time as well.
U.S. adults with the lowest levels of financial literacy, as scored by TIAA Institute’s Personal Finance Index, spend 13 hours per week, on average, thinking about and dealing with personal finance issues and problems, according to a study published by the organization in May. Those who scored the highest on TIAA’s test say they spend roughly four hours a week dealing with their money, on average.
The difference is nearly an entire workday per week, time that just about anyone would probably want to spend differently. But for those mired in a cycle of constantly thinking about and managing their money, clawing back time isn’t just about learning the types of things that could help them score better on a financial test.
For one thing, it’s very likely that there is correlation between those with low levels of financial literacy and those facing financial insecurity, says Christine Benz, director of personal finance and retirement planning at Morningstar.
Those spending more time on their money, she says, may be trying to make ends meet, for instance, by moving money around, dealing with creditors and managing bills. “It seems likely that the root cause is scarcity,” she says.
And when it comes right down to it, studying the ins and outs of finances alone isn’t what’s going to take financial tasks off people’s weekly schedule, says Doug Boneparth, a certified financial planner and founder of Bone Fide Wealth.
“Most of the stress isn’t from complexity necessarily. It really emanates from open loops, unsolved questions, unautomated tasks and unscheduled decisions that are constantly creating this low-grade hum of anxiety,” he says. “So it’s not really about knowing more information, it’s about closing these loops.”
Here’s how he and other financial experts say to do it.
Prioritize a financial buffer
Financial experts generally recommend building an emergency fund large enough to cover three to six months’ worth of living expenses, which Benz acknowledges can be tough, especially amid competing financial priorities.
But if you’re caught in a cycle of constantly worrying about your finances, saving at least some money each month for emergencies should be the no. 1 money task on your to-do list, she says.
“Building an emergency cushion and putting it in front of your other financial goals really pays huge benefits in terms of peace of mind and very likely in time saved from these financial activities where you’re having to move money around,” she says.
The logic here is simple. By building a cash buffer, you don’t have to spend time worrying if a flat tire or a trip to the doctor could mean that you’ll come up short on rent or miss a credit card payment.
Automate and simplify where you can
When it comes to limiting the time you spend dealing with your finances, the “lowest hanging fruit” is to automate the way that your money moves, says Boneparth.
“We can get rid of the human hours that are being spent around decision making,” he says. To the extent that you’re able, “auto-pay everything: your bills, subscriptions, debt payments — it’s a one-time setup that requires zero weekly maintenance.”
Start by setting up automatic transfers from your checking account to your emergency fund, says Benz. Once you have a comfortable cash cushion and you’re certain you won’t overdraw your accounts, you can add your monthly bills. The goal, experts say, is to eventually have money going toward all of your financial goals, such as saving for retirement and tackling debt, without you ever having to see it come and go from your bank account.
“If you never see it, you never have to decide,” says Boneparth. “It’s already being done.”
You’ll also save time, Boneparth says, by consolidating the number of accounts you have to interact with.
“Having too many accounts, too many credit cards open, just creates one more thing to check, to reconcile, to worry about,” he says.
To better manage the accounts you do have, Boneparth recommends signing up for a service that allows you to link your financial institutions and gives you one, birds-eye view of your spending, saving, investments and debt.
“There are so many amazing apps out there to put everything into one view with one login, one solid snapshot, you can get it all done that way,” he says.
Make the most of educational resources
There’s only so much you can do by yourself. Eventually you’ll encounter a financial situation that no amount of emergency savings or automation will fully prepare you for.
When those situations arise, you’d be wise to seek help and outsource your time to a pro — and it could be easier and cheaper to get than you think.
“Financial education has evolved, and quality resources are available,” says TIAA Institute’s Surya Kolluri, who specifically highlights resources available through employers. “Take advantage of the financial wellness resources, retirement plan matching and educational programs your employer provides, because those tools exist precisely to support financial literacy.”
You may also be able to find a financial pro, such as a certified financial planner, through pro bono events in your community, says Benz. Though make sure the advisers aren’t just there to flog their services, she adds.
“It can be difficult to discern who’s there out of the goodness of their heart and who’s there to sell you something, so, you do need to be careful,” she says. “But some of those events can be a great way to obtain free financial advice from a professional.”
And if you want a try to get a better grip on your finances, don’t try to learn every single thing about money at once, Kolluri says. Instead, focus on the aspects of finances relevant to your life stage, she says. That means that younger people can move the needle by boning up on saving habits and long-term investing, while older folks would benefit from studying the ins and outs of claiming Social Security, she says.
“Targeted knowledge, not encyclopedic knowledge, is what reduces the daily financial stress that drains so many people’s time.”
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