Personal finance does not need to be complicated.
There may be many finance blogs and books out there that give you tons of advice and make things sound overwhelming.
This should not be the case, we can make things simpler by breaking them down into basic personal finance tips that you can apply in your life right now.
These tips are not easy, but once you make them a part of your lifestyle, you will have more control over your money and get to live a fuller life.
Don’t Spend More Than You Make
This tip may seem obvious to many but why are so many not applying this?
According to CNBC, 78% of Americans who work full-time are living from paycheck to paycheck.
There is a big difference with knowing that this should be done compared to actually doing it.
If you want to be set apart from the 78%, you should start spending less than you earn.
This is one of the basic and crucial financial tips that you can apply to your life and experience freedom from debts.
Make a Budget
Most people encounter the word “budget” and cringe at the thought.
Budgeting is not as hard as you may think and it certainly does not mean that you have to stop doing things that you love.
You need to create a plan for your spending so that you have an idea where your money goes every month.
You can apply the 50/30/20 rule.
Apply this by allotting 50% of your income for things that you need like paying bills, food, house, and car to name a few. The next 20% of your income goes to your savings account while the remaining 30% you can spend on whatever you please.
This is a nice and easy way to distribute your salary every month which will need some adjustment to fit your lifestyle.
To make things clearer, you can do a breakdown of your income into daily values:
You earn $7,000 a month = $233 a day
You pay $750 a month for food, gas, and internet = $25 a day
You pay $800 a month for rent which is = $27 a day
You pay $200 for car insurance which is = $7 a day
Based on your earnings and expenses above, you will have $174 a day of spending money left.
Budget this wisely and don’t spend it all.
If you want to buy a brand new car for example which is worth $10,000, this will amount to 58 days worth of your spending money.
This approach gives you a picture of your spending ability and how an added purchase will affect your finances.
Pay Yourself First
This tip is more common and it can impact your finances. Paying yourself first means that you send a portion of your paycheck directly to your savings account immediately.
Doing this at the end of the month rather than upon getting your paycheck may leave you with nothing to send for savings.
You can apply the 20% rule here and watch your savings grow every year.
This is not just for emergency spending but can also be used for large purchases like a house or car if you do it long term.
Saving up for retirement is also a wise thing to do. You can decide not to spend your savings unless you really need to.
Make Clear Financial Goals
If you want to reach your financial goals, you need to know what they are first.
Making your goals clear and writing them down can help you become motivated and plan to reach your goal faster.
You don’t need to set unrealistic goals. For first timers, you can start small and think about your plans in different categories like:
save $2,000 a month
buy a house
buy a new car
start investing for retirement
travel the world
give to charity
give to your church
Make both short term and long term goals that you can look forward to. Check your progress each month and monitor if you are near your goals or not.
