Think you’re clueless about personal finance? Here are a few basic rules to follow.
Whether you’re single, married, new to the workforce, or near retirement, it’s important to have a good handle on your money. Here are six personal finance tips you should always make sure to follow.
1. Always have emergency savings on hand
This is a great solution to financial stress and a stress management tip. You never know when you might lose your job, fall ill, or encounter a situation where you’re unable to work. If you don’t have savings, you run the risk of taking on debt or getting into major financial trouble when the unexpected hits. That’s why you should always have an emergency fund with anywhere from three to six months’ worth of living expenses. Furthermore, you should keep that money in a safe place like a savings account so that it’s available to you on a moment’s notice. If you don’t have an emergency fund already, building one should take priority over all other financial goals, including retirement or a down payment on a home. You should also review your emergency fund periodically to make sure it meets your ever-changing needs.
2. Aim to live below your means
When you spend every penny you bring in, you leave yourself zero wiggle room for unplanned expenses and lose the opportunity to save. And the latter can be a major problem, especially as far as retirement goes. Living below your means can actually remove some of the financial pressures you might otherwise be facing, and once you learn to be happier with less, you’ll appreciate the flexibility of having extra money on hand. But more so than that, living below your means will allow you to save money for the future. No matter where you are in life, you should always aim to save at least 10% of each paycheck, and the more you surpass that mark, the better.
3. You need a budget
No matter how much you earn or how costly or seemingly affordable your living expenses are, you still need a budget to keep tabs on your finances. If you don’t have a budget already, now’s the time to create one. Once you do have that budget in place, commit to following and reviewing it periodically to see if changes need to be made. Also — and this is crucial — your budget should always leave you with some room for savings. If it doesn’t, it means you’re spending too much and should start cutting back.
A big part of managing your finances is getting your priorities straight and setting goals. Follow these simple rules and commit to a financially responsible lifestyle, and you’ll reap the benefits both now and in the future.