Practicing personal finance doesn't mean you can't ever spend your money, it just means you need to spend smart, and spending smart sometimes means saving your money. That is much easier said than done, but try to keep track of not only the money you spend and the money you earn. Budgeting your money will help you decide where your money should be spent, like on bills, food, and home expenses. And where you can save like on entertainment, travel/vacation expenses and accessories.
Take Home Pay
It is a good idea to be aware of how much monthly income you make because that will be the first step in managing personal finance. From here you can set up a financial calendar and this can help you keep track of what money you need to spend, especially if you have trouble remembering when payments are due.
Having an emergency fund should be a must. Accidents and other tragedies happen and it's smart to be prepared for something like that. If you spend your money wisely and do proper budgeting, you can then spend money on things like home repair or medical expenses without having to worry if you have enough money for it. Managing your money does not only mean for the near future, you need to save money your entire life. So set aside a good amount of money for a future period and use it when you need it most.
Though you may think you're too young to start thinking about a retirement plan, think again. If you practice smart personal financial choices your whole life, a retirement fund should come naturally. You need to be constantly saving for your financial future and what's a better way to reward yourself after a lifetime of hard work then to not have to worry about retirement planning because you used your financial wisdom through the years to have good retirement savings.
A credit card can be a tool or a weapon when it comes to personal finance. On the one hand, it can help you make large payments if you do not have the money at the time, but that means you will eventually have to pay off the credit card debt you accumulate. You need to use credit cards wisely because if you have too much debt your monthly cash flow and financial planning will go down the tubes and you may be in a worse spot financially than you were before. Only use a credit card if you know you can pay off the amount you used. Never spend more money than what you have. Credit card debt doesn't only affect your bank account, but your credit score.
If you ever want to take out an auto or mortgage loan, lenders typically do a credit report to view your credit history. If you have a low or poor credit score, then it will become increasingly difficult to get loans for houses or cars. If you want good credit scores, then use your credit cards as a helpful tool and not a get out of jail free card. You can keep track of this by doing free credit reports.
Buy Proper Insurance/Loans
Everybody's financial goals are going to be different. Everyone needs some form of insurance in their lives, but you may be paying for the wrong ones. If you own a car, then of course you will need car insurance. Smart personal finance is looking at your financial situation and deciding when and where you need to spend money. Take a look at health insurance. If people in your life depend on your income, then health insurance is something you should get.
But if you are financially independent and no one relies on your income but yourself, then you do not need it. There are some insurances like disability insurance, that lenders will tack onto different bills and you may be paying way too much for it. Really decide if you need insurance for something like disability before you end up paying for it for years and never use it. Renter's insurance has a lot of benefits. Not only does it help out in cases of robberies and natural disasters, but it can also cover costs of medical bills if someone gets injured on your property. Again, plan for everything and spend money on the things you truly need.
When applying for a loan, you will most likely always encounter interest rates. Credit card debts, auto loans, mortgages, and savings accounts are just a few loans and financial accounts that deal with interest rates. An interest rate tells you how high the cost of borrowing is and if you are the borrower, the interest rate is the amount you’re charged for borrowing money.
Lending can be tricky and rates vary across different providers, so when looking for a loan or trying to start a savings account, make sure you choose one that gives you a fair interest rate. Having a high interest rate can leave you paying more money than you need.
It is better to choose a federal loan over a private loan due to high interest rates. This will help you with student loan debt in the future. Managing expenses now will lead to a more prosperous personal financial future.
Financial and Investment Opportunities
With personal finance, having financial success does not mean you do not spend any money, you just need to spend smart. And what better way to spend smart then by making more money in the process! Having too much savings doesn't sound like a bad thing, but those savings you have aren't getting you more savings, just the same amount. Look into starting an investment account, but make sure these investments don't interfere with your monthly savings or financial goals.
Look into different mutual funds and other investment opportunities to build up a good investment portfolio. Again these investments should not put you into financial ruin or get you off track from your personal finance goals. Look into a brokerage account, these are investments that do not get taxed and give you more freedom in your investments. Investing does not automatically mean free money, but it doesn't hurt to try to bring in more income.
This is something that anyone who is practicing personal finance, should hear. Get your money out of your checking account and into your savings account. If there is any money in your checking account, you will spend it. Move it over to a savings account and start saving, instead of spending.
Pay Your Taxes
Your personal financial goals may be impacted if you do not pay your taxes. In terms of savings commitments, taxes should be your number one priority. You will have to pay taxes annually for the rest of your life, so you should be budgeting your money to make sure you have more than enough money to pay your tax bill when the season comes.
Buying a house is a big expense and requires a lot of thoughtful planning and shopping around different options so you aren't paying way too much for your home. A big killer when buying houses is the down payment, you never want to put less than 20% down. The reasons being that you cannot invest that money elsewhere, if you are not planning on staying in the house for a long time then it's a waste of your money, and if your house loses value so does your investment into it. Also, putting down a larger down payment can lead to lower interest rates.
Handling personal finances alone can sometimes be a daunting lifestyle, especially if you are just starting out. If you truly do not know where to start, then maybe seek the help of a financial advisor. These are people that dedicate their lives to helping people with their financial situations and understanding financial education. You can also see around your community if they offer free personal finance classes to help you reach a good financial lifestyle.
Save Early, Live Easy
This point needs to be really driven home. The best way to pay bills, invest your money, buy a home, or even try to figure out how much debt you have is to save and to keep track of your money. Knowing your financial constraints is the first huge step in your personal finance journey. Saving not only allows you to pay all your financial obligations stress-free, but it also allows you to spend on things like entertainment and travel. Just because you're practicing personal finance doesn't mean you can't save some vacation money. Mostly, personal finance is developing strategies on how to save and budget your money properly and you do not need to be a certified financial planner to achieve that financial independence. So go out there and start saving, you will thank yourself in the long run.