What are the top 7 personal finance basics everyone needs to know?
You’ve come to the right place! Today, we’ll dive into the top 7 personal finance basics everyone should keep in mind. But first…
What are personal finance basics?
Personal finance refers to the management of money, including but not limited to budgeting, saving, investing, retirement planning, and more.
Personally, I like to view it in 3 stages: past, present, and future.
Past:
Do you have any debt previously incurred, or any hard money lessons you learned in the past?Present:
What is your current financial situation?Future:
Where do you want to be financially? Are you interested in retiring early? This is where you use your current financial situation and plan for the future one.
Your responses to each of these questions will impact how you go about managing your personal finances. Personal finance is just that, personal. It’s not a one-size-fits-all situation.
This post is about the top 7 personal finance basics everyone needs to know.
1. Emergency Fund
What does 3-6 months’ worth of expenses look like for you?
How much have you saved up and how much more do you still need to consider it fully funded?
2. Budgeting
50/30/20
- 50% for necessities
- 30% for wants
- 20% for savings
Cash envelope method
Portion out your budget into cash, enclosed in separate envelope categories. You can only spend what’s in those envelopes, and when you run out, you can either dip into a different category envelope or cap it.
3. Debt Pay Off
Do you have a car, student loan, medical bill, or another loan?
4. Retirement Saving Accounts
Do you work full-time and does your employer offer a 401(k) match?
Is the employer match not enough? Do you want to contribute to your retirement in addition to the 401(k) match?
5. Investment Accounts
One of the key factors in wealth building is investing – putting your money to work.
6. Goal Setting
Similar to career goals, you can set financial goals you want to achieve! Examples include how much you want to save up for your emergency fund, general savings, pay off debt, investment accounts, and more.
7. Taxes
Not the happiest of topics, but especially if you have income other than a full-time, W-2 job, your taxes may not be automatically calculated and withheld.
So you’ll have to account for that amount, and set that money aside. Otherwise, you may be hit with a surprise tax bill that you may or may not be able to pay!
Bonus: Quarterly, Mid-year, and Annual Reviews
Doing check-ins throughout the year allows you to reflect on your progress, and figure out if you need to make any adjustments to either your goals or your budget. It’s important to ask yourself, how did you do?
There you have it! Top 7 personal finance basics everyone needs to know! Let me know which tip was your favorite in the comments below! Interesting in learning more? Check out this post on the biggest investing mistakes to avoid!
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