Improving Your Financial Literacy Before Beginning Your HR Career
As you prepare to enter the HR world, you’re likely focused on the skills necessary to excel in the responsibilities of your new role. However, make sure you’ve brushed up on other important life skills that can also help you succeed professionally, one being financial literacy. Especially for those pursuing careers in HR, understanding personal finance is just as important as mastering people management and other strategic HR concepts.
By taking action to understand financial basics, you’ll set yourself apart as a knowledgeable and responsible professional. These foundational principles will not only benefit your own financial well-being but also empower you to advise on complex matters such as employee benefits and organizational sustainability. Your experience in developing your own financial strategy will serve you well in doing the same for your prospective organization.
“When professionals gain the knowledge to keep their finances under control, they gain the space to focus on their work and other aspects of their lives,” said Keren Maldonado, SHRM-SCP, director of total rewards at SHRM. “Financial acumen in HR professionals is more than understanding the balance sheet. You will find yourself better helping candidates and employees understand the total value proposition of your company and build better rewards strategies for the retention of your critical talent.”
Here are some tips on how to improve your financial literacy, including setting a budget, understanding credit scores, and negotiating with a prospective employer.
Creating a Budget
Establishing a personal budget that resonates with your lifestyle and aspirations is a staple skill in your financial literacy toolkit.
“When you start budgeting earlier in life, you create habits that will make it easier to reach goals in the long run. In the short term, good financial planning will allow you to balance your financial responsibilities with your entertainment needs,” Maldonado said.
Assess your income and expenses. How much do you make? How much are you spending on housing, food, and other necessities?
Set clear goals. Whether it’s saving for a certification program, retirement, wedding, or home, your financial road map should align with your aspirations.
Track your progress and monitor your spending patterns. Adjust to ensure that your habits aren’t compromising your ability to meet your financial goals.
Understanding Credit Scores
Your credit score is a financial passport that can grant or limit your access to numerous opportunities.
Understand the calculation. Delve into how the credit score is calculated and what factors are at play. A credit score is generally determined based on five factors: your payment history, amount owed, new credit, length of credit history, and credit mix. It’s a three-digit number that ranges between 300 and 850. According to Experian, a score of 700 or above is desirable. Boost your credit score by not falling behind on your payments.
Strategize for improvement. Learn how to take steps to elevate your score, including by making timely bill payments and maintaining a low credit utilization ratio.
Avoid common pitfalls. Knowledge is your shield against the perils of unnecessary debt.
Managing Student Finances
Understanding how to manage student loans is an important piece of the puzzle when it comes to improving your financial literacy. A focused strategy can help mitigate this financial burden.
Apply for scholarships and grants. Cast a wide net and explore the multitude of financial aid available for HR students.
Understand repayment options. Familiarize yourself with the different repayment plans and potential forbearance or forgiveness programs.
See what kind of financial benefits a potential employer may offer. A growing number of companies offer employee benefits, including student loan repayment assistance and student loan refinancing options.
“Start planning way before you need to start paying. You know that it’s coming, so start thinking about personal budgeting,” Maldonado said.
Saving on a Shoestring Budget
Although it may seem impossible to save on a limited budget, it’s possible with the right approach.
Leverage student discounts. Taking advantage of student discounts across various categories can amplify your savings.
- Consolidate everyday costs. Try new money-saving strategies to reduce your weekly expenses, such as meal planning.
- Limit unnecessary spending. Examine saving as a necessary expense. Understand that financially preparing for the future is crucial to your well-being.
- Balance your desires with your need to save money. Allow yourself some hard-earned budget space for personal enjoyment, but not so much as to compromise your short-term and long-term financial goals.
“Be mindful of what is unnecessary without completely cutting entertainment needs. It’s like going on a diet and cutting everything you like, which will make you miserable and likely make you quit,” Maldonado said. “Setting a budget for entertainment is important, and perhaps it will be smaller at the beginning while financial wellness improves, but it will allow you not to feel that you are missing out on life because of your financial responsibilities.”
Decoding Job Offers with a Financial Lens
Your job offer is not just about the role and the title; it is a financial proposition you should analyze carefully. Not all aspects of a job offer are set in stone, either. Hone your negotiation skills to claim what you’re worth.
Evaluate benefits beyond salary. Look at a company’s comprehensive benefits package and assess its tangible value to your life and health.
Understand stock options and bonuses. Familiarize yourself with potential sources for additional income, such as stock options and bonuses.
Get prepared. When it comes to salary, research industry standards and understand your worth in the market before entering into negotiations with a company for a specific position.
Be ready to negotiate. Approach the negotiation process with a blend of assertiveness and diplomacy to foster a win-win outcome
Make sure to understand your needs and place in life as you make your decision. “What benefits are provided and how much it will cost you to cover the benefit on your own? Where are you and what do your next five years look like? Are you starting a family?” Maldonado said.
The Path Forward
To further your financial knowledge, seek out additional courses, workshops, or mentorship programs that specifically address financial literacy. Engage with alumni networks and professional associations to exchange insights and best practices. Remember, the quest for lifelong financial education is a dynamic and rewarding pursuit that evolves in tandem with your personal and professional growth.
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