Many people often find that they struggle with personal finance. Personal finance is an important skill that sadly, too few people learn in school or from their parents. However, there are steps that you can take to improve your personal finance knowledge – and your personal finances along with it.
Today, we’re reviewing 5 simple personal finance tips that you need to know. Remember: the sooner you start making changes, the sooner you’ll see results, and the sooner your financial picture will begin to improve.
Let’s start by looking at the first tip, which is also often one of the most effective.
Table of Contents
Get real about your budget
Before you can get serious changing your financial habits in other areas, you’ll first need to set about creating a budget that you can stick to. Budgets are important for a number of reasons:
- They allow you to see a bird’s-eye view of your finances
- They give you insight into the money that comes in and goes out each month
- They allow you to plan ahead for future large expenses
- They help you keep your finances on track with your plans
If you’re not sure how to budget, start with a simple and effective plan: the 50/30/20 budget. This method requires you to spend about half your income on necessities, 30% on fun “wants”, and 20% on debt repayment and savings. It’s a handy tool for first-time budgeters.
Speaking of debt repayment, let’s focus on that now.
Start to tackle your debt
It’s no secret that most Americans are in debt. Whether that’s student debt, credit card debt, a mortgage debt that is more that you can handle, or a large medical expense, many people find that debt keeps them from being able to make the ends meet.
That’s why the next personal finance tip to follow is to prioritize paying down debt. It may take a few months – or even a year or two – of saving up a little extra money on the side, or cutting back on some of your favorite hobbies, but it will be well worth it in the long run.
Pro tip: Did you know you can be in debt and not even know it? If you receive a tax offset number, that could mean that you owe money that you’re unaware of. Be sure to address that as soon as possible, or else the debt could start to grow.
Think about cutting costs
Being focused and frugal is one of the most rewarding life changes that you can make. When people think about cutting costs, they often first imagine clipping coupons or shopping only in the sale rack. While that can certainly be a start, there are actually many areas that you can start cutting costs:
- See if using public transit or riding your bike is more cost effective than driving a car.
- Cancel subscription services that you’re no longer using, like cable TV.
- Consider buying thrifted clothes rather than paying for brand new items.
- Learn useful skills like cutting your own hair, fixing your own car, or working on your own plumbing.
Once you start to add up all the costs you save, you’ll be surprised by how much more money left over you have at the end of each month!
Save for your future
Savings is a critical goal to strive for in your personal finances. Sadly, too few people are serious about savings. Even young people should start saving. In fact, the earlier they begin saving, the more money they’ll have further down the line.
If you’re not sure where to start, think about opening up a high-yield savings account so that you can grow your money while you save it.
Know how to grow your money
Speaking of growing your money, that’s our last tip: start investing as early as you can. Even if it’s just a few dozen dollars, you’ll start to see results over time. Investing sounds scary, but you don’t have to bet on stocks to make satisfying earnings. Try using a robo-advisor that will automatically build an effective portfolio for you, and see your savings soar!
The road to personal finance may seem difficult, but like any road, you’ll get there by taking one step at a time.