Getting (and staying) on top of your personal finances is no easy feat. For most of us, learning the ins and outs of money management can be a daunting task that comes with serious responsibility. Luckily, understanding how to handle your finances is easier than you might think. With a few simple tips and tricks, you’ll be well on your way to feeling like a finance pro.
Let’s start with the basics. Read on for our four essential finance tips everyone needs to know.
#1 Set a Realistic Budget
Crafting a realistic budget is the backbone of personal finance. It might seem simple, but understanding where your money goes can be an eye-opening experience. If you’ve hesitated to make a budget in the past because you think it means cutting out the things that make life fun, think again!
Here are a few tips to making a stellar budget that fits your lifestyle:
- Start Simple – Start by factoring in big expenses like rent, utilities, groceries, savings, and car payments into your budget. Starting with these is not only necessary, but it also alleviates some pressure during this process—because these categories are mostly fixed, this part is pretty simple.
- Recurring Expenses Add Up – Chilling on your comfiest couch while scrolling through Netflix can feel free, but it also means money is flying freely from your wallet every month you pay for it (unless, of course, you’re mooching off an ex). A realistic money mindset isn’t about canceling monthly subscription services altogether—it’s about accounting for them.
- Leave Yourself Some Wiggle Room – If tracking everything down to the last penny is too stressful for you, that’s fine. You should always allot some discretionary spending in your budget for miscellaneous purchases. Leave some space for those last-minute coffee runs, or an impulse buy (or two). As long as you’re paying your bill and add to your savings each month, you’ll be good to go!
#2 Make Money While You Spend Money
When you think of personal finance, spending might seem like the enemy. However, spending money is an inevitable part of life, so learning how to spend is an invaluable skill.
Trust us: credit cards can be your friend. As long as you don’t spend more than you can afford and make your payments on time to avoid interest, you’ll be in a position to reap tremendous rewards every time you swipe.
When you’re comparing cards, consider programs that offer the following benefits:
- Cashback
- Travel points
- Retail points
- Sign-up bonuses
Picking the right card takes a little research, but you’ll thank us when you cash-in your rewards for your dream vacation—sipping a margarita at the beach feels even better when you pay for it with points.
#3 Take Tax Time Seriously
Tax season isn’t fun or glamorous. As much of a headache as doing taxes can be, you need to do them—and you need to do them correctly. Whether that means hiring a professional accountant or carefully using an online service on your own, taking time and care to do your taxes correctly can help you avoid serious issues.
The last thing you want to deal with is owing money to the IRS, losing your precious refund to a tax offset, or getting in trouble with the IRS. Once you get tangled in a tax web, you’ll need more than personal finance basics to get you out, so it’s easiest to stay on top of it in the first place.
#4 Plan for the Best and the Worst
One of the most important aspects of managing your personal finances is planning. Don’t make the mistake of just planning for the good or the bad. A well-rounded personal finance strategy includes a plan for emergencies, but also for when things go your way.
Consider planning for the following:
The Good:
- Saving consistently throughout the course of your professional career can mean you might be able to retire early.
- Making a big purchase (even if it’s frivolous) isn’t frowned upon if you’re meeting all your other financial metrics—feel free to save money for a house and your dream car rather than that sensible sedan.
- There’s truth in the saying, “it takes money to make money.” Once you’ve established a financial safety net, it’s easier and more practical to start tackling other financial goals.
The Bad:
- Life happens to even the most responsible and diligent financial planners, so everyone should save up for unexpected surprises like a big medical bill or home repair.
- You’ll also want to save in case the economy fluctuates. Responsible financial planners should be ready to handle an economic downturn.
- Be sure to include six or more months-worth of income in your emergency fund in case you lose your job.
Managing Your Finances is a Lifelong Process—It’s Time to Get Started
The sooner you start taking steps to actively managing your personal finances, the sooner you’ll be able to start reaping the benefits. From financial stability to finally being able to purchase your dream car, there are so many upsides to starting now.
You can do this!
