Regardless of how
much money you have, your job, income, age, or priorities, personal
finance is extremely important. A lot of people lack the basic
principles of personal finance, and one bad situation, or economic
down turn could have a catastrophic impact. Some people choose not to
worry about money, saying that money doesn’t buy you happiness. But
when facing catastrophe those people could have used some common
knowledge personal finance.
First and foremost always have an emergency fund on hand. This is incase of one of those hardships. Things like losing a job, or being unable to work due to sickness are one of the most common ways people get behind on bills. Without this emergency fund safety net, your only option is to take on debt. Without anyway to pay it off at the end of each month, that debt will continue to grow with interest rate, and can become very difficult to dig yourself out of. That’s why having an emergency fund is vital. Generally it is recommended to tally up all of your expenses each month and put away 3-6 times that amount. That way you will have three to six months to figure out what to do, and avoid taking on debt in the process.
Another common lesson taught is don’t over spend your means. In fact it is recommended to try and have your monthly expenses below your earning. That way, if possible, you can save that extra money. This is common practice for any personal finance curriculum, and for good reason. Saving for a big purchase such as a new car, new house, or even saving for retirement can seem like a daunting task. But living below your means allows for you to take advantage of that extra income and save it. It is recommended to try and save at least 10% of your paycheck. The more the better.
If you don’t already creating a weekly and monthly budget is a personal finance staple. Often times people may think they are living well within their means, and still don’t understand why they have no money left over. Or even worse not having enough money at the end of each week. Creating a budget and sticking to it can seriously help track your expenses. If you don’t already have a budget, start making note of everything you spend money on. There are apps for your smart phone, or something like a spreadsheet, or pen and paper will do. After tracking your expenses for a month, you can analyze where your money is going, and where you can cut back. Lot’s of things are luxuries like video subscriptions, and eating out. Taking note of these things and better more money efficient alternatives can help leave more money in your pocket after each week.
These are just a few commonly discussed personal finance advice. There are even more nuanced and more detailed things you can do to help you save money, pay off debt, and have a better future financially. Personal finance should be taken seriously, and the earlier these habits are installed, the better.