Knowing some Personal Finance Tips does not mean you know it all! You’ve got to practice a consistent daily regime to savor the taste of a perfectly secure future and early retirement.
Are you struggling with money? Do you find yourself spending lavishly after payday and before you know it, it’s difficult to make ends meet? Do you have no savings despite being paid a hefty salary?
If that sounds like you, then you’re at the right place. Managing personal finances prudently is one of the biggest challenges of life. However, with the right financial tips, it is possible to manage your finances in an efficient manner. With the help of these tips, mastering your money and making it work for you would be just like a dream come true!
So, read these well-categorized personal finance tips to help you stay on the right financial track!
Need the Motivation to set your finances straight and get Success? Here’s what the Richest in the world think!
The times demand that people be smart with money. American businessman Robert Kiyosaki, who is a true expert in personal finance management, says:
“Financial freedom is available to those who learn about it and work for it.”
Moreover, as Joe Dominguez and Vicki Robin state in their book “Your Money or Your Life”,
“It is crucial to transform the relationship with money to achieve true financial independence.”
In fact, it is true that rich people have a different mindset about money. It won’t be wrong to say that becoming rich is a matter of psychology. Take lessons from Elon Musk’s example, the richest person in the world, on how to invest your money for maximum gains.
“My proceeds from PayPal were $180M. I put $100M into SpaceX, $70M into Tesla, and $10M into Solar City. I had to borrow money for rent.”
We can see how his mindset revolved around reinvesting the money he earned for a bigger profit rather than wasting it on fleeting enjoyment.
Jeff Bezos, founder of Amazon.com was famously quoted on the benefits of proper money management, saying:
“I think frugality drives innovation, just like other constraints do. One of the only ways to get out of a tight box is to invent your way out.”
Many people share the same desire. However, actually achieving that dream requires taking action and actively reinvesting your money for bigger and bigger gains. Truly, handling money is not just a simple task; it is an art form.
The Ultimate Personal Finance Tips to get the most out of your money
Here, we discuss the best ways to manage your money in detail.
1. Follow the 50/30/20 Rule
The 50/30/20 rule was first popularised by Elizabeth Warren, U.S. Senator, and has become a good rule of thumb and widely adopted in the financial world.
According to this, you split your income into 3 categories. Spend 50% of it on your needs like rent, mortgage payments, health insurance, gas, electricity, food, etc. Similarly, 30% of your income should address your wants. For example, travelling, shopping, restaurants, gym memberships, hobbies, or anything that falls under entertainment. The remaining 20% should go toward savings and investments.
It is not a must to stick to these exact numbers, but following this categorization will surely keep you on track.
2. Separate savings from checking account
Saving money is an essential aspect of personal finance. Coming up with the right savings plan gets you closer to your financial goals. So, what are the best tips for saving money?
First of all, use budgeting apps or a spreadsheet to keep track of the amount of money you are earning, investing, and saving. Second, when it comes to money advice, separating your savings from your checking account is very high on the list.
It doesn’t matter if the two accounts are in the same bank or not, as long as you stick to keeping them apart. While it may be inconvenient for some; still, it makes saving a lot easier. Moreover, a savings account should be left alone unless there is an emergency.
It is also crucial to find the right balance between checking and savings account money. It makes sense to leave about two months’ worth of living expenditures in a checking account. Dave Ramsey, an American Bestselling author, businessman, and personal finance figure suggests keeping at least 6 months of expenses in the emergency funds untouched.
3. Earn Returns by putting Money in a Savings Account
Keeping money in only a checking account means you are not taking full advantage of your money. That’s because savings and retirement accounts do offer more returns and higher interest rates. Some banks even have Savings Builder accounts which offer even more benefits than traditional ones.
Moreover, more and more people are self-employed and looking for early retirement. For them, it is even more crucial to get extra returns on their savings. Plus, 401(k) plans are still dominating this sector. Once you cross six months’ worth of savings, you could start thinking about opening another retirement account. Obviously, it is up to you to find the proper parameters that work best for your situation.
4. Don’t Fall for the Influencer Trap
With the rise of social media and technology, the younger crowd faces additional challenges when it comes to saving money. It is nearly impossible not to be influenced by what goes online. Influencers exhibit a lavish lifestyle that people want to emulate. Moreover, being exposed to so many ads, it is always tempting to buy something new. However, it is not sustainable.
According to a report by Forbes, Young Americans between the ages of 18-29 owe a staggering $1,08 Trillion in debt collectively. Most of it is accredited to credit card and mortgage debts. There is no need to follow a particular lifestyle and spend more money than you are making. It is always best to stick to what you can afford. In terms of personal finance tips for young adults, here is a timeless fact; live within your means for a better and more secure future.
Other personal finance tips for college students and young adults include the need to start saving for retirement as early as they can. And, always keeping an eye on putting some money aside even if it’s very little.
In addition, it is never too early to start thinking about the future. Another element is to not ignore your taxes and to pay your bills on time. This will ensure that you don’t pay late fees.
In short, the best way to manage your personal finances is to be proactive.
Can money Really Buy Happiness?
Indeed, people try to copy influencers because they are rich, famous, and happy. Supposedly, they are successful, and don’t we all want the same? However, many people will tell you that money can’t really buy happiness. In fact, a survey revealed that only 1/5th of Americans believe that money can buy happiness. even Bill Gates commented on this saying,
“Money has no utility to me beyond a certain point.”
However, he also continued by adding that the utility of money lies purely in building organizations to help the world’s poorest. Of course, we are not saying that improving your personal finances means turning into a billionaire philanthropist to find meaning in life.
Nevertheless, it is true that having money makes life a lot easier. It reduces stress and gives you stability. According to a study, financial stress was linked with higher levels of psychological distress. Therefore, having money not only makes your life easier but also improves your mental well-being as well as gives you the freedom to do whatever you want in life that makes you happy.
5. Be Savvy and Save Money on Groceries
With inflation being a global problem, basic necessities such as food and groceries are costing thousands of bucks now. Not to mention, grocery stores are facing a lot of issues as well. It is getting difficult for people to maintain a budget. Therefore, they are looking online for ways to save money on food and groceries.
- Keep a lookout for items that are on sale.
- Prepare a grocery list and make sure you stick to it.
- When you are at the grocery store, have a calculator nearby to track your spending.
- Compare prices between different grocery stores.
- Only shop at grocery stores and supermarkets. Avoid convenience stores as they tend to be more expensive.
- Purchase generic brands rather than big-name, famous ones for cheaper prices with almost identical quality.
6. Managing your cash flow is paramount to good personal finance
Managing your money the right way, first and foremost, requires a clear analysis of your current financial situation. The other personal finance tips will only work once this honest assessment has been made.
1. Increase self-control and limit your spending
Self-control is very important when it comes to managing money. A simple way to boost savings is to cut back on your expenses. Do not buy unnecessary things. However, this is a task that requires self-control and discipline. There is a way to counter this impulsive behaviour.
Before you purchase something new, always pause. Give yourself some time to think and evaluate if this purchase is really needed.
Bonus Tip: Some financial advisers swear by the 30-day rule. It is a simple concept. If you want to make a big purchase, give yourself 30 days before making a move. If you still want to buy the item after a month, it is probably the right call. On the other hand, if you have forgotten about it, then congrats, you just saved yourself some money! To keep your finances in order, self-control is paramount.
Furthermore, it is best to set priorities. Instead of buying items that lose their value, focus on getting new experiences that are priceless, like a visit to the local museum, taking your dream vacation abroad, or spending quality time with your loved ones.
There are many activities that are free where you can get more satisfaction than from buying a material object. To accomplish this feat, delayed gratification is essential.
Another area where self-control is key is your reaction to receiving a big sum of money, like on a payday. Staying calm and resisting the urge to spend most of it, is a really important personal finance tip. In essence, self-control helps you be wise in the way you approach money; and the way you decide to spend it.
2. Making more money means more savings and investments
Managing money efficiently is also about finding ways to improve your financial situation.
- You can try to get a salary raise at your current job. Increasing your hours could mean more cash in your pockets.
- Launching a side hustle is a very popular route these days. Sometimes, the side hustle even becomes your primary source of income.
- Delivering groceries or walking dogs are activities that can bring additional income.
- Some people even find ways to earn extra cash by selling things on eBay.
3. How to share money
Relationships are not always simple to navigate. When money gets into the picture, it makes things even more complicated. The following tips can make sharing finances less challenging.
- Communication is key. Set the ground rules about money early on in the relationship to avoid surprises and conflicts later on.
- Understanding the other one’s finances is also important. It helps you know what you’re getting yourself into.
- Discuss your views about money clearly. You need to understand where the other stands on spending and savings.
- Protect your assets even when the relationship is strong. Signing a prenup before marriage is a wise way to manage your money.
7. Protect Your Money for a strong Economic Situation
Regardless of how the economy is faring, you need to know how to protect your money.
1.Get professional help from Personal Finance Consultants
A great financial advisor can help you reach your financial goals faster. An expert will know how to protect your money in the long run and show you ways to get the best returns. Moreover, it is their job to know where things are headed and guide you on your next best move.
For example, an important personal finance tip that a pro might give you is to stay calm when the stock market is going through a rough patch. It is always best to take a long-term view of the situation. There is no need to rush and dump your stocks because of an economic downturn. Such a move may feel reassuring, but it might undoubtedly cost you more money. If your portfolio is diversified in the right manner, you should recoup your investment after things settle.
Leaving your money alone for a period of 7 years is more profitable. However, if you are close to retirement, you might want to go a different route and not wait for the rebound. A professional can make these difficult moments less tense by keeping the focus on the bigger picture.
This is also true for the way you handle your debts. It is best to come up with a debt plan. Taking help from a professional financial advisor will greatly benefit you in this case.
2. Beware of scammers and Con-artists
To protect your money, you need to be careful of scammers. To do so, check your bank accounts daily. Plus, never give your personal information to unscrupulous people. Moreover, make sure your computer is protected; and do not click on links that are not trustworthy.
8. Practise Best Budgeting Practices for an Optimal Personal Finance
Budgeting is a very important step in personal finance. You need to know how to budget your money the right way.
1. Create a targeted budget
In this budgeting phase, not only do you have to track your net worth but also set a targeted goal. This goal can be anything; for example, paying off student loans or mortgages or having a certain amount saved up by the end of the year. Update your budget regularly to stay informed and on top of your personal finance game.
Fortunately, some budgeting apps can help simplify this process. Money software like Personal Capital can make a huge difference in how you manage your finances. Furthermore, they help you keep yourself accountable as well.
2. Take care of your credit score
One of the most shared personal finance tips is about the need to maximise your credit score. In order to accomplish this, you need to understand what is a good credit score and the content of a credit report. Credit Karma, a personal finance firm, offers a free assessment as a starting point that you should check out.
In a nutshell, a credit score over 700 is good. When you get over 800, it is considered excellent. While calculating your credit score, the following things are considered:
- 35% payment history, for example, whether you make payments on time or not.
- 30% amount owed; this includes all of your dues and credit card debts combined
- 15% length of credit history; lenders and banks prefer long credit history as it gives them more data to base their decisions upon. If you have a long history of making timely payments, your credit score will be very high.
- 10% credit mix; this consists of all types of loans you owe such as credit cards, bank accounts, home loans, etc.
- And lastly, 10% new credit; your recent credit history also plays an important role in your credit score. if you’ve recently opened too many accounts or taken multiple loans will reflect badly on your credit score.
Improving your credit score will make it easier for you to get certain loans and better interest rates. That’s why it is important that you stay on track with your finances and do not neglect your payments.
9. Be Smart about Investing your Money for a WIN-WIN situation!
Gone are the days when investing was just limited to the stock market. Today, there are a number of alternative investments available that anyone can tap into regardless of their economic profile. When looking for investment advice, you should consider yourself as an asset too. Making money work for you is an art that once mastered pays lucrative dividends.
1. Invest in yourself
Finance is no different than many other things in life. The more you know, the better it is for you. A great personal finance tip is to invest in yourself before you start making other moves. For example, financial literacy is very important. You can work on your financial education by taking some classes or buying a few books. This can help you master your money which will further help you come out ahead in the long run.
Financial education will make it possible for you to understand key investment terms that you will need for your money to grow and reach its full potential.
A good example is understanding the difference between assets and liabilities.
Assets vs. liabilities
In short, assets bring money to your pockets, while liabilities do the opposite.
Opposite to popular belief, your house can actually be a liability instead of an asset if it is taking money away from your pocket at the end of the month or year. Contrarily, if you have a real estate property rented out; and receive a great return on investment as a landlord, after taking care of taxes and maintenance. Only then can you classify your property as an asset.
Additionally, assets include cash, real estate, investments, inventory, office equipment, machinery, and company-owned vehicles. Liabilities have to do with debts (bank and mortgage), taxes, money, and wages owed.
2. Smart ways to invest money for maximum profit
You need to know where to put your energy and focus if you want to get the most out of your money.
Explore investment options outside of the stock market
The stock market is one of the first areas where people look when they are ready to invest. While it is an excellent place to invest for your retirement, other options do exist. Alternative investments like businesses, art, and real estate should also be considered because they can be very profitable. Especially, investing in gold and other precious metals is very lucrative too.
Have goals for your money
You are ready to invest. Here is one of the top tips for personal finance: you need to have different sets of goals for your money. Long-term objectives are those over five years. Short-term goals correspond to anything under five years. You always need to have a vision and know what you want to get out of your money. Is it for your dream home? Or are you just focusing on next year’s vacation?
Can you do it on your own?
After knowing your objectives, you need to decide if you are ready to handle an investment portfolio on your own. While going solo is possible, it is not for everyone. A professional might be able to map things out for you in the correct manner.
Summing It up
Rarely do people stop to think about their financial situation. Indeed, most people are too busy chasing momentary pleasures and avoiding the crippling anxiety of living from paycheck to paycheck and surmounting debts to truly evaluate their finances, much less take actions to improve them. For the golden few who’ve made it through this article, keep your eyes on the goals. And, soon financial freedom, early retirement, and great returns on investments; all will be within the back of your hand!