Financial Tools Every Consumer Needs

With April being Financial Literacy Month, now is a great time to discuss what financial tools consumers needs to have in their toolbox to become informed and effective money managers.

With a little planning, it’s easy to establish good money habits that will lead to financial stability in the future.

Here are simple tools to aid in improving budgeting skills, saving techniques, and retirement plans:

The budget: This is where it all begins: It is essential to keep track of money coming in and money being spent. Write down all of your expenses; determine what you pay in groceries and food each week, mortgage and car payments, utility bills and any spending on entertainment. Be honest and realistic when forming your budget.

After you have finished, determine your debt to income ratio: Assemble all your monthly payments for debt service and verify what percentage of your net income they make up. If your debt is 15% to 20% or more of your net income, you are in trouble and will have to immediately whittle away all the excess spending -- stop buying coffee every morning, trim back on going out for dinner and try using coupons -- it all adds up to saving money.

Software Programs: If listing your expenses on paper is a hassle, there are a plethora of software programs to help out. Sites like,, and many others make it easy to track your spending and identify unnecessary expenses. There are also a number of apps for smartphone users that track spending.

Spending Reduction Plan: Once you have a budget in place, now is the time to create a spending reduction plan. Make a list of all your wants and needs and then take a realistic look at what you can afford. Keep track of how much money you’re saving and find a suitable place to put that money.

Emergency Fund: An emergency fund is essential to cover any unexpected and expensive costs that come up. Having this fund means you won’t have to put it on a credit card and go into debt.

Automatic Savings Account: To augment your emergency fund, open a bank account that will have a portion of your paycheck automatically deposited. Talk to your banking representative and investigate what accounts offer more benefits and make certain this account is separate from the main “operating” account used to run your household.

Retirement Accounts: If your employer offers a retirement plan, take advantage of it--this is a basic tool that will help you build savings for the future. Even if allowed, do not borrow from your retirement plan--it’s not a bank account, it’s your retirement safety net and loans against these accounts normally have grave consequences.

Free Materials: Go online or to your local library and seek out literature on saving money, planning for the future and anything else that can improve your financial stability.  Don’t wait, start filling your toolbox as soon as you can and gain control of your finances.

Howard Dvorkin, CPA, is the founder of Consolidated Credit Counseling Services, Inc., and the author of Credit Hell: How To Dig Out of Debt. He is also personal finance expert and consumer advocate who has been helping people for more than 15 years.