Becoming financially literate—meaning you understand the ABCs of managing your money—is essential to helping you get what you want from life, whether that means furthering your education, buying a car or a house, raising a family, riding out the impact of a market downturn or having financial freedom to do what you want.

So, how do you develop the knowledge and skills you need to take control of your finances, even during challenging times? Here are five things you can do to gain a better understanding of how your money is working for you:

1. Create a budget.
   Learn to track your money—what comes in and goes out. Whether you use a notebook or an online financial literacy website such as mymoney.gov, write down everything you spend and where you spend it—from your rent/mortgage, car insurance and groceries, to subscription services, gym memberships and takeout coffee. Once you see exactly where your money is going, create a spending plan or budget to help you meet your everyday needs while still building savings for the things you want.
    
2. Start an emergency fund.
   If you can, sock away a little money each month in a savings account. Aim to save enough to cover three to six months’ worth of living expenses. This will help you manage financial shocks, like a furlough from work or an unexpected expense that may come along, without having to borrow money.
    
3. Understand and manage debt.
   Understanding the damaging effect of high-interest credit cards and other types of debt is crucial. Make a list of what you owe, including the lender, amount and interest rate. Then, make a plan to pay down that debt as quickly as possible. Focus on the account with the highest interest rate, putting as much money as you can toward that debt until, one by one, you’re debt-free.
    
4. Maximize your retirement savings.
   Saving money isn’t easy, but take advantage of your employer-sponsored retirement plan by contributing as much as you’re able. The money you contribute will grow tax-free until you withdraw it. Generally, withdrawals are subject to income tax at your ordinary income tax rate at the time of withdrawal, and if made prior to age 59½, a 10% federal tax penalty.
    
5. Invest in yourself.
   Learning to manage your money more effectively doesn’t need to be complicated or time-consuming. There are many simple ways to develop and improve your financial literacy, including accessing the tools, articles and other resources available at mutualofamerica.com.