What is Personal Finance?
Personal Finance is a broad term that covers a plethora of topics. These topics include investing, banking, budgeting, retirement funds, so on so forth. It is important to consider financial risks when getting into personal finance also, because it isn’t all rainbows and unicorns. I will release more content going further in depth, but for now this is just a general overview.
Why is this Important?
With the increasing popularity in the stock market and investing, it is most important to know how, when, and why to invest and save your money, as well as how to spend it. Getting your personal finances right can set you, and potentially your family up for generations to come, if done right. One key word that everyone looks for is FINANCIAL FREEDOM. Who doesn’t want that? How obtainable is this dream? It is extremely obtainable, but again you must do it right and not get caught with your pants down.
What are Some Financial Strategies?
- Constructing a Budget
The absolute most important thing in regards to personal finance is your budget. This can make or break your financial future. You must get your expenses and income in control. They key to a good budget is having lower expenses than what you’re bringing in (no brainer). There are plenty of budgeting strategies out there to help you get your financials right, but let’s just start with the basic 50/20/30 rule.
- Needs are your monthly essentials, such as rent, utilities, internet, gas, food, etc. These are essential to your living so this will make up the bulk of your budget. The 50% can further be broken down into more percentages specific to your exact monthly essentials, but that varies from person to person.
- Wants are your lifestyle expenses. These include, or may not include monthly subscriptions, eating out, coffee, expensive clothes, etc. While not as important as your monthly essentials, your wants are also important, which is why this category takes up 30% of your budget.
- Savings is pretty self explanatory. This can be a general saving for the future, or it can be split up into different amounts for investing, buying a new car or house, and possibly an emergency fund (About 3 months worth of living expenses in case of emergency). This will take up 20% of your remaining budget.
2. Keep Your Debt at a Minimum
This ties back into the key of having a good budget. Keeping your debt at a minimum is simple, spend less than you earn. There are certain instances where having debt can be advantageous to your wealth, such as taking out a loan to buy a house. It is ALWAYS important to keep track of these debts though, because if you lose track then you could go even further into debt, and hurt your credit score.
3. Creating an Emergency Fund
Previously mentioned, an emergency fund can be an amazing thing for your personal finances. An emergency fund is roughly 3 months or more of living expenses just in case anything goes wrong and you need to stop working. Emergency funds are really coming into he light as of late due to the recent pandemic where many were forced to stay home and not work. The expenses covered by your emergency fund should be your essential monthly expenses, because those are what you need, any wants should be an afterthought.
4. Building Your Credit
Credit cards can be debt traps if used incorrectly. It is best, in most cases, to start out with a secured credit card. A secured credit card is a credit card that uses money you put in a security deposit as collateral. So essentially when you payoff your secured credit card, you are just paying yourself back. These can be used as ways to build credit and prove to your bank that you are capable of using an unsecured credit card. It can often be hard to find and compare credit cards, but what I find the most useful is creditcards.com. They offer a list of credit cards based on the criteria you choose.
What are Some Tools?
There several apps out there that are used to help control your personal finances. My personal favorite is intuit mint. This app is available on both desktops and smartphones, and offers a wide variety of financial tools. I use it to help keep track of things that I am saving for, what I am spending my money on, and how much money I am bringing in on a monthly and yearly basis. Intuit mint allows you to keep track of your overall net worth, and your credit score as well. You can keep track of your investments along with giving more ways to save your money, this app really has it all!
Now that we’ve gone over some basics to personal finance, I challenge you to devise a budget for yourself or your family, and start saving for the future! Don’t forget, if you like my content please subscribe to stay up to date with upcoming articles coming down the pipeline!
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