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Personal Finance Tips
What Are Personal Finance Tips And Do They Apply To Me?
Were you ever in a situation where you wanted to buy a new car but you simply couldn’t afford it? Or did you ever wonder how long you would need to work to retire with a million dollars in the bank? These are concerns that can be addressed if you get your personal finances in order. Managing your personal finances involves taking a look at your income and spending it wisely so you set up your future self with success.
Let’s take a look at these 10 top personal finance tips to get you started today.
1. Keep Track Of Your Spending
If you don’t know why your account balance is so low every month, you’ll definitely need to track what you’re spending it on. Once you identify where your money is going, then and only then can you start managing it. Save all of your receipts and keep a log of what you’re spending.
Combine this data with a printout of your credit and debit card transactions. Spreadsheets can come in handy for keeping track of your spending. Use a notepad or a piece of paper to write everything down if you have to.
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2. Start Budgeting
Putting together a budget is one of the best things you can do to keep your finances on track. There are a variety of different budgeting styles to choose from, like the envelope budgeting system, or you can use a free budgeting app that you can use either on a desktop or download onto your phone.
If you don’t like computers and prefer to use a pen and paper, there are free budgeting printables you can download and print out.
Make sure you include EVERYTHING in your budget, including irregular spending, so you can see exactly where your money is going. Once you have a working budget, you can make better decisions about how to spend, save and invest.
Budgeting is one of the most underrated personal finance tips and tricks, so make sure you conquer your budget.
Related: The Debt Snowball Technique
3. Prioritize Your Needs
Once you have a clear picture of all of your monthly expenses you can see how much of your money is going towards the cost of living. Living expenses include things you have to spend money on such as the monthly rent, food, water, heat, clothing, transportation, and insurance.
You can tell if you’re living above your means if you’re regularly spending more than 50% of your income on this. For example, if your income is $5000 a month after taxes and you spend less than $2500 a month on living expenses, then you are good.
You should re-evaluate your living conditions if you’re spending more than $2500 because this will impact your ability to use your money for other purposes such as savings and wants.
3. Create a Savings Plan
Experts agree that allocating 20% of your after-taxed income to a savings plan will help build a stable and secure nest of funds that can be used towards purchasing your first home, for emergencies, or supporting your kids through college.
People usually put their savings in a savings account through their debit or credit card provider. This isn’t the best thing you can do because these accounts are usually low-yielding. Look into an online savings account where you can typically see ten times that of traditional savings accounts.
For example, the bank down the street may offer 0.05% APY while an online service may offer 0.50%. If you made a single deposit of $1000, which is 20% of the $5000 monthly income, after a year you’ll end up with $1000.50 with the traditional savings account while the online high-yield savings account will have $1005.01.
You’ll need to be consistent on your savings though. Realistically, you should be putting in $1000 every month and increase it as your salary increases throughout the years. By doing this you’ll see your account balance grow faster due to compounding interest.
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4. Spend On What You Want
We all have to live a little right? Don’t think you have to live a boring life to keep your finances in order. If you’ve been keeping track, you’ll notice that we have $1500 left to spend on anything else. Go ahead and spend your hard-earned dollars to go watch a movie at the theaters or go on a vacation with family and friends. There’s nothing wrong with that.
Just make sure to spend and save your money wisely so that you don’t go over 30% of your after-tax income on these things that aren’t necessary.
Wants are things that you spend money on that you don’t really need in order to live. Upgrading to a Mercedes instead of keeping your Camry, joining a gym rather than working out at home, ordering filet mignon instead of chicken, getting the latest and greatest iPhone 12 when you know your iPhone 8 still does the job – these are all wants because you really don’t need them.
5. Being Frugal
Being frugal doesn’t make you a loser, it makes you smart. Once you learn all the clever ways to save money you will never look back, and you can use those savings to invest in a more comfortable future for yourself.
There are all sorts of tips and tricks to help you stop spending money on things you don’t need, cashback apps that earn you coupons or money back when you shop, tips on how to save money on groceries, how to grow your own herbs to save money, and ways to save money on electricity.
Being frugal isn’t just about saving money and spending less, it is also about learning how to get free stuff like coffee. If you are into haircare, skincare, and makeup, then there are ways to get freebies sent straight to your doorstep in the mail. Why not take advantage?
The world of frugality is as large as it is exciting, and there are always ways to make your money work harder for you. Being on the lookout for potential savings in your everyday life is one of the best personal finance tips.
6. Pay off Credit Card Debt
After you have a clear understanding of where all of your money is allocated, you can now start to improve your debt situation by lowering your monthly bills to your credit card companies.
It’s easy to spend a lot when using credit cards. It’s even easier to misunderstand the impact that APY’s can have on your recurring debt. Every month when your credit card bill is due you are paying interest on the balance of your loan.
The bigger your balance is, the more money you’ll be paying to the creditors every month.
Work towards lowering and paying off your credit card bills because some APYs can get seriously high – it isn’t uncommon to see them go higher than 20%.
If you have multiple loans, medical bills, and balances on your credit cards, it’s best to look into debt consolidation loans with low APYs. You can actually save a ton by doing this. The added benefit here is that you can reduce stress and clutter by only managing one bill.
7. Maximize Your Employment Benefits
Talk to your benefits team at your work to discuss what benefits are available to you such as 401(k), health insurance, and flexible spending accounts. Taking advantage of these can help save some money by reducing out-of-pocket expenses and reducing taxes.
Be careful with keeping track of everything though because it’s easy to miss something and not claim all your deductions and credits. You should get this out of the way now so you don’t end up scrambling later in the year come tax time.
Additionally, although it varies between companies, there’s usually an option called “employer match” where they match what you contribute into your 401(k) retirement plan up to a certain percent. This is essentially free money – take advantage of it now!
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8. Start Investing
Put your money to work and start investing is one of the best personal finance tips around. Oftentimes the income you make from your regular job just isn’t enough. Maybe your income doesn’t allow for any savings or wants.
Perhaps you would like to retire with a million dollars, for example. Whatever the reason is it’s usually a good idea to have another source of income.
Look into safe investments such as Treasury or Corporate bonds, dividend-paying ETFs, real estate, or gold.
Whichever you pick, understand that there are risks that come with investing in these. Research what’s out there because there are plenty to choose from.
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9. Shop Smarter
Shopping is a necessary evil as we all need food and clothing to get through the day. Thankfully, you don’t have to pay full price for things like groceries and other wants and needs when using cashback apps. Cashback apps come in all shapes and sizes and there is almost always one to suit your shopping style.
DOSH app is one of the best cashback apps around because of how easy and convenient it is to use. You can sync your cards to the platform and automatically get cashback when you shop at any of their partners. There are literally thousands of shops and online stores that have partnered with DOSH – from shopping to dining to booking hotels.
Simply use the card you have synced with DOSH and you automatically get cashback without having to scan receipts or coupons.
10. Start A Side Hustle
Unfortunately, most of the time working a regular 9-5 job won’t make you rich enough to live comfortably. Starting your own business or creating your own side hustle is great way to make some extra cash while taking control of your financial future.
One of the main benefits of creating a side hustle and working for yourself is that you are your own boss. You get to decide when you take a lunch break, or when you go on holiday, and if you are sick, you don’t need to call your boss and explain why you need the day off.
Creating your own side hustle is also potentially very lucrative. You can scale a business, you can’t scale a job. This means that although you can ask your boss for a raise, there is a limit as to how much you can earn in that job. A side gig has endless potential; the sky is the limit when it comes to how much money you can make on your own.
If you are stuck for ideas, check out our 100+ side hustle ideas to get your creative juices flowing.
How can personal finance help you get ahead?
Learning how to improve your personal finances can have a significant impact on your physical and financial health. Imagine that you didn’t have to worry about affording your electricity bill, or how you are going to pay for medical bills if you got sick. Being broke is stressful and significantly affects your health.
What is the best personal finance app?
This is a hard one to answer because there are so many great personal finance apps out there, but we would have to say a budgeting app to keep your spending on track, and an investing app to help you grow your wealth and invest for your future.
If you were looking for one of the best overall personal finance apps, check out Truebill.
What is the best FREE personal finance app?
Mint is a really great free personal finance app that offers a good range of benefits and features.
Where are you with the above list? If you’re not doing more than four out of the ten personal finance tips, then you should really take the time to work on them. It’s best to work on each tip one at a time but definitely start from the top. Get your finances in order before you do anything with your money. Once you’ve mastered these basic personal finance tips, your future self will thank you.