Financial advice is not just limited to how much money you should be putting into savings and investments. Personal finance often begins with budgeting, banking, insurance, mortgages as well as retirement planning and tax preparation. This can help people in every stage of their life- whether they are newlyweds looking for the perfect location for a honeymoon or retirees wanting to what’s best way to spend time on vacation while still living comfortably after retiring from work at 65 years old!
Personal finance is about meeting your personal financial goals, whether it’s having enough for short-term needs or saving up to meet long-term goals. Personal finances are different from person to person depending on their individual requirements and desires. It’s important that you become financially literate so as not to fall prey to bad decisions based on false information
The sooner you start saving for the future, the better. As we all know, it’s never too late to create financial goals and make a plan that will keep us financially secure as well as give our families freedom from worry. Here are ten personal finance tips!
1. Devise a budget
The 50/30/20 budgeting method is a great way to allocate your money according to what you need and want. Fifty percent of fifty net income (after taxes) goes towards expenses that are essential for living, such as rent, utilities, groceries and transport.
Thirty percent of the remainder can be allocated toward discretionary spending on things like dining out or shopping for clothes from time-to-time. Giving back by donating some portion of your income will also help others who may not have the opportunity to do so themselves!
Saving for retirement and emergencies is an important part of financial stability. Twenty percent goes toward the future—paying down debt, saving up to ensure a healthy nest egg in old age, or putting aside money so you can pay your bills if disaster strikes.
2. Create an emergency fund
Pay yourself first by setting aside money for unexpected expenses, like medical bills and car repairs. If you don’t have a safety net of 3-6 months worth of living expense saved up, start putting away 20% from each paycheck to fill your emergency fund. Once it is full, continue funneling the monthly 20% toward other financial goals such as retirement or down payment on a house
3. Limit debt
The best way to avoid going into debt is by simply not spending more than you earn. However, it can be advantageous in some cases if the investment will lead to a high return on your money. For example, leasing may be cheaper and just as effective for someone who wants an expensive car but doesn’t want or need one long-term; this person might choose lease payments over paying the upfront cost of ownership.
4. Use credit cards wisely
If you have credit cards, use them responsibly. That means paying off your full balance every month and keeping balances below 30%. Credit is a major debt trap but it’s unrealistic not to own any in the contemporary world; they are crucial for establishing good credit as well as tracking spending which can be helpful when budgeting.
5. Monitor your credit score
Credit cards are the main vehicle through which your credit score is built and maintained, so watching how you spend that money goes hand in hand with monitoring your ever-important credit report. If you want to get a lease, mortgage, or any other type of financing then it’s crucial for building up an excellent credit score. There are many types of these scores available but most people use FICO because it’s trustworthy and accurate.
There are five main factors that determine your FICO score:
Payment history (35%)
Amounts owed (30%)
Length of credit history (15%)
Credit mix (10%)
New credit (10%)
- Exceptional: 800 to 850
- Very good: 740 to 799
- Good: 670 to 739
- Fair: 580 to 669
- Very poor: 300 to 579
FICO scores range from 300-850 with 850 being the best.
6. Consider your family
Protect your family’s future by making a will and setting up trusts! Be sure to also take care of the necessities like auto insurance, homeowners or renters insurance, life insurance (if you have dependents), etc. Also, look into long-term care as well. Periodically review your policies to make sure that it meets the needs of your family.
7. Pay off student loans
There are a plethora of loan repayment options available to graduates. If you’re stuck with an expensive interest rate, paying off the principal faster can make sense. On the other hand, minimizing payments (to just interest) could free up income that’s better invested elsewhere or put into retirement savings while you’re young – when your nest egg will get its maximum benefit from compound interest. Some private and federal loans also have their rates reduced if they are paid through auto-pay!
8. Plan (and save) for retirement
It’s often said that retirement is a lifetime away. In truth, it arrives much sooner than many people expect. Experts suggest most Americans will need about 80% of their current salary in order to live comfortably during their retirement years; which means the younger you start saving for your future self, the more benefits you’ll see from what advisors like to call “the magic of compounding interest.”
9. Maximize tax breaks
When it comes to taxes, are you leaving money on the table? If so, then start saving receipts and tracking expenditures for all tax deductions and credits. You’ll be amazed by how much more cash will find its way into your wallet this year!
10. Give yourself a break
Planning for a vacation or spending your hard-earned money on something you want is one of the best ways to feel like you’re enjoying yourself while still working towards financial independence. By rewarding yourself now and then, it will give you motivation that much more quickly when struggling with planning over what’s worth saving up for later.
Now that you know what personal finance is and are armed with 10 personal finance tips, aren’t you glad that your personal finance will finally be in order? Good luck!