Here’s a little secret…When I graduated high school, I knew nothing about money.
After four years of college, I was a little more knowledgeable, but I was in full-blown debt, and it would take me years to recover.
Managing your finances and your physical (and mental) health are two of the most important things to focus on in your twenties and thirties.
Did you know that nearly 60% of Latino households in the U.S. have little or no savings for emergencies, and about 40% of Latino families have no retirement savings at all?
Meanwhile, average white families have four times more savings than Latino or Black families, according to the U.S. Treasury.
The financial gap is real, but there are smart, practical steps you can take to improve your financial health today.
Improving your financial health doesn’t require a huge leap—it’s about making small, consistent changes that add up over time.
Whether you’re just starting or looking to improve your financial habits, these five tips can help you take charge of your money and build a more secure future.
Smart Things to Improve Your Financial Health
Track Your Spending and Create a Budget
Understanding where your cash goes is the first step to taking control of your finances. Latino households are disproportionately affected by financial instability, often due to a lack of budgeting and tracking expenses.
But don’t worry. This struggle is an issue that nearly every community has.
Start by reviewing your spending habits over the past few months and categorize where your money is going.
Various tools and apps can help you create and maintain an easy-to-follow budget that works for your unique situation. But really, there is nothing wrong with getting a sheet of paper and listing all your expenses.
Some banks also have various tools to tell you what you are spending your money on. Taking advantage of banks and the banking system is essential. Read Why Smart Banking Matters for Latinos.
Once you have a clear picture of your spending, set realistic limits for each category—like groceries, transportation, and entertainment—and try to stick to them. This simple step can help you stop living paycheck to paycheck and create a path to financial freedom.
Start Saving for Emergencies
Financial advisors will recommend that you have three to six months’ worth of living expenses saved in case of unexpected emergencies. Three months may be okay if you live in a household with two income earners. The point is to have a little cushion in case one of you loses a job.
Unexpected emergencies happen – often when we don’t think about it.
Yet, 42% of Latino households do not have enough savings to cover an emergency of $400, a statistic highlighting the need for a financial cushion. Again, many Americans from other communities would struggle as well.
Here’s my recommendation:
Start small—aim to stash away $500, and gradually work up to a fully funded emergency fund.
Even $15 or $25 a week can add up over time, and it’s one of the most important things you can do to protect your financial well-being. Ideally, keep at a separate bank than the one you regularly use – or open up a completely different account with a different ATM card. This will discourage you from easily spending your savings on a whim.
Understand and Manage Debt
I remember when I was just out of school and overwhelmed with debt. I didn’t even want to look at my bills. Shoving my bills in my desk drawer felt like I got rid of them! I quickly learned that avoiding my debt prolonged my debt and made it more painful!
Debt is a significant barrier to financial health for many Latino families. Nearly half of Latino households carry some form of consumer debt, whether it’s student loans, credit card balances, or personal loans. The key to managing debt is knowing what you owe and your interest rates and creating a plan to pay it off systematically. Ultimately, managing my credit and improving my credit score would save me thousands of dollars in real dollars.
There are three things that you should consider to control your debt:
First, stop using your credit cards or applying for credit at big box stores or department stores. Second, make regular payments every month, paying much more than the minimum. Third, go for your first win – pay off the most manageable bill you have first and then use that money to go for the one with the highest interest rates.
Invest for Your Future
Yes, I know that investing while you have debt is hard—some people even recommend against this—but not me. If you want to break bad habits (spending), you have to create good habits, such as savings and investing. You have to save and invest so regularly that it feels weird when you don’t.
Investing is one of the most powerful ways to build wealth, yet only about 25% of Latino families invest in stocks or retirement funds.
Even small investments can yield big returns in the long run due to the magic of compound interest. Consider starting with employer-sponsored retirement plans like a 401(k) if your job offers one. You can also look into individual retirement accounts (IRAs) or low-cost index funds – at companies like Charles Schwab or Vanguard.
The earlier you start investing, the better. Time works in your favor when building wealth through investing, so don’t wait—start today, even with small amounts.
Review and Optimize Your Insurance Coverage
Insurance is an often overlooked part of financial health. Many Latino families have insurance but may be overpaying or underinsured in certain areas.
Review your current insurance policies annually—whether for health, auto, life, or home insurance—to ensure they meet your needs.
If you’re paying for unnecessary coverage, or if you can increase your deductibles, this can save you money in the long term. Insurance isn’t just a safety net; it’s a vital part of your overall financial strategy.
Set Money Goals and Create a Plan to Achieve Them
About four years after graduating college, I decided that I couldn’t afford to simply wing it. My finances were too important to me. I had to create a budget and a financial plan. For me, it was going to graduate school and financing it myself without loans.
Several years later, when I graduated with an MBA, it was a wonderful personal achievement. But what made it even sweeter was that I graduated debt-free.
Setting clear, achievable money goals is a big part of financial health. Whether you’re saving for a car, house, grad school, a business, your child’s education, retirement, or anything else, having a specific goal makes it easier to stay motivated.
I recommend that you break down goals into small and actionable “mini goals” or steps, and set a timeline for accomplishing them. Reassess your goals periodically to ensure they align with your current financial situation.
Conclusion
Getting your finances right may take time, but realize that this never fully ends. Managing your finances is a life-long job. Aside from devoting yourself to your family and health, it is the most meaningful thing you can do.
Whether you focus on budgeting, saving, managing debt, investing, or seeking professional guidance, each step brings you closer to financial security and peace of mind.
As you progress on this path, remember it’s about making small, smart decisions that add up over time. No matter your background or current situation, you can start building a better and healthier financial future for yourself and your family.
