Personal Finance Basics – 10 Best Tips

Personal finance can be a challenge but if you find the best tips to use, it can be much easier.

The key is to develop and use certain tips to instill good habits in your life. These good habits can start as small changes in your routine but turn into big money savers as life goes on.

The best 10 tips to use include:

Build Budget

Break Down Every Expense Into Monthly Amounts

Create A Safety Net

Cut Down on Extra Expenses

Pay Your Bills On Time Every Time

Use Helpful Resources

Start Saving for Retirement Early

Avoid or Reduce Credit Card Debt

Get as Big of Tax Break as Possible

Continue to Educate Yourself On Personal Finance

Utilize these tips to start setting yourself up for success for the rest of your life.

The first point is to earn more than you spend. There are two different ways to earn more than you spend and these are focusing on making more money or focusing on spending less money.

Through this post I will demonstrate helpful information on personal finance basics and how significant these skills can be.

I have had great success focusing on spending less and will focus on this way throughout this post.

Build Budget

Building a budget is the first step in mastering your finances and understanding where you really stand. Write out all of your expenses and your total income. There are some key terms that I list below to help explain the best way to get budgeting.

Gross Income

Post Taxes income

Total Expenses

Post Taxes Income – Total Expenses = Net Income(After all expenses are taken into account)

Doing this break down of your expenses will show you where you financially stand. If you end up having a negative number here or very close to a negative number, it will quickly show you that you need to have more income in your budget.

Your gross income is your total income before taxes are taken into account. The post taxes income is the income that you will have after all the significant taxes are taken into account. To find out what you are likely to pay in taxes, try out this tax calculator.

When you break down your budget this way, you can get a quick idea of where you stand. After you have done this you can start getting more detailed about your expenses and how you to easily pay these expenses off each month.

Break Down Every Expense Into Monthly Amounts

Breaking down each expense into monthly amounts will turn all of your expenses into a doable amount. This monthly amount can be easily calculated. Take any expense and determine how often it occurs. From here you take the total amount for the expense and divide it by the number of months between when it occurs.

For example, a yearly dentist visit costs $150. Take this $150 total and divide it by 12 months to get the monthly cost for this expense. The monthly expense for the yearly dentist visit turns out to be $12.5.

$150 = Yearly Dentist Expense

$150/12 = $12.5 Monthly Expense

This monthly amount is the amount that you will need to save each month in order to be financially prepared for this yearly expense. I like to turn all of my expenses into these doable numbers because then they are more easy to cover each month.

Pile of money
Create A Safety Net

Create A Safety Net

A safety net of money is great for giving you a financial cushion that protects you from unexpected costs that come along. Creating a safety net of money equal to 3 months worth of your total expenses is an amount to shoot towards.

An easy way to start building up a safety net is by coming up with an amount that you want to save every month. You then treat this as one of your monthly expenses that has to be paid every month.

Even if you have debt right now, it is still better to build up some of a safety net of money. This is because even a relatively small safety net, still is going to protect you from unexpected expenses.

This safety net will also keep you on track to pay off the debt sooner. This is because it will provide you with a financial cushion so that you can consistently pay off the debt without worrying that you will suddenly be derailed by an unforeseen expense.

Cut Down on Extra Expenses

Cutting down on extra expenses is going to be big for saving money that can be used for other important financial tasks. Cutting down expenses for me is about focusing first on the most changeable expenses because these normally have more room to adjust.

The main changeable expenses include:

Food

Miscellaneous

Car

These expenses encompass many other smaller expenses that all can be adjusted.

Delicious Sandwich
Prepare More Food

Food can be reduced by preparing most of your food at home. Doing this will keep you from spending extra when you have to go out to eat because you don’t have any food prepared.

Focus on the simple foods and always carry snacks with you. Food is such a constant necessity that always having food on your person is going to keep you from spending a lot extra.

The miscellaneous expense includes any of the unused subscriptions, extra streaming channel subscription or gym expense. Any of these can be reduced or eliminated by reviewing your budget. You can quickly determine whether you need these expenses in your budget or if they can be cut out.

You also can review your online banking account statement to look at any of the transactions that have occurred in the last few months. This can help you find any extra expenses that have sneaked into your life.

The car is a big expense for most people that can be reduced by simply not driving as much. Finding a way to walk, bike ride, or take public transportation is going to reduce your car expense. This is because you will pay less in gas expenses but also on the wear and tear expenses for the car.

The gas expense is the easy one to know that you are saving money on by not driving the car. But the wear and tear expenses can become quite expensive, especially as your car gets older.

The wear and tear costs usually are the tires, oil, brakes and any other expense that involves replacing significant parts of your car. The car can only run so long before it starts to break down.

Some cars can last a really long time before they start to break down. But no matter what car you drive, the less you drive the less expensive it will likely be.

Pay Your Bills On Time Every Time

Paying your bills when they are due every time is going to be a great habit to help you in life. Using online banking is going to be a great way to make paying many of your bills automatic. It can also be very easy to transfer the money over from one account into the other with no fees attached.

I like to monitor my online banking account at least twice a week to make sure that no extra expenses have sneaked into my life. When I use my credit card, I check either the next day or the day after that to pay off my balance.

I do this so that it is never something that I forget about. You can transfer over some funds from one account to the other without there being any fees. You can even pay for a credit card balance from a card that is not part of the same bank.

I always mark down on my calendar when important bills are and when specific miscellaneous expenses are due.

Use Helpful Resources

Using helpful resources can be great for getting the best information to stay on top of your finances.

The following 3 websites are some of the best resources to use:

ThePennyHoarder

NerdWallet

Credit Karma

Any of these resources will provide beneficial information about how to save, make or budget your money better. The Penny Hoarder has specific sections for Making Money where you can learn about quick money ideas or side gigs.

This is one of my go to websites to learn more because they have such an abundance of helpful information. They also have a key section dedicated to budgeting and finding a way to stick to your budget.

NerdWallet is very similar to The Penny Hoarder and is an excellent source of tips. Their goal is to give objective advice and educate people on how to make smarter money moves.

They have a Money section that goes into Managing Money, Ways to Save, Making Money and Life Events. The life events section specifically helps prepare you for college and even a career guide.

Credit Karma is chock-full of information that could be valuable to using a credit card and how to build up your credit score. Once you are signed up with this free service, you will be able to check on your credit score easily.

If you ever find yourself in debt, they have a Debt Repayment Calculator. This could help you find out how long it will realistically take to get the debt paid off.

Utilize these resources to get helpful tips and information to manage your finances intelligently.

Start Saving for Retirement Early

Start saving for retirement early to get the benefit of compound interest. There are many options for investing some money for retirement and I will break down the basic options.

The main 3 options for saving for your retirement include:

Traditional IRA

Roth IRA

401K

Each one of these accounts will allow you to put money into an account that will gain interest. A traditional IRA is one that allows individuals to put pretax income into an investment account.

You will not get taxed on the money that you put into an account. You will only be taxed on the money that you take out of this account.

Roth IRA is the opposite of the Traditional IRA. The Roth IRA allows contributions to be made only after taxes have been accounted for, which means you get taxed on what you put into this account.

Roth IRA accounts can have the money that you put into this account withdrawn without being penalized. But any investment gains that you get from this account cannot be withdrawn from this account before you are 59.5 years old. If you do withdraw from this account before you are 59.5, then there will be a 10% penalty fee on the amount that you take out.

Credit Cards
Avoid or Reduce Credit Card Debt

Avoid or Reduce Credit Card Debt

Avoiding or reducing credit card debt is going to be essential for maintaining your finances. If a credit card debt is not paid off quickly, this can be a burden that consumes a big part of your life.

Finding a way to develop good spending habits is going to keep you from being as likely to build up debt. But even if you do have debt, by developing good spending habits you can consistently take steps to pay off your debt.

If you want further tips for decreasing debt, read Reducing Debt Tips.

Get as Big of Tax Break as Possible

The tax breaks that people can get are often significant and it is simply a matter of finding the right information.

There are times when someone can believe that they are getting taxed particularly hard only to find out that a recent tax change has given them some breathing room. Tax laws and details are constantly having changes happen and these changes can be good or bad.

In the U.S., the 2018 standard deduction rose from $6,350 in 2017 to $12,000. This is a big difference for low income earners who now don’t get taxed as much for their income. The 2019 standard deduction will be $12,200, so an additional small tax relief.

If you want to learn more about how to save on taxes, read How to Save Money on Your taxes.

Continue to Educate Yourself On Personal Finance

Continuing to educate yourself on personal finance is key to getting smarter with your money. There is always more to learn and the more you know, the more informed you can be to make a smarter decision.

Checking out the resources already listed here as well as visiting your local library can be great for furthering your knowledge. Money can have a profound effect on your life, especially if you aren’t managing your money well.

I like to consistently make time to keep educating myself on something new for personal finance. Find what amount of learning works for you and you will keep getting better and better with your finances.

Become a Pro in No Time!

These 10 tips should help you get prepared for managing your finances like a pro in no time. Developing good spending habits can take some time but the more you use them the more likely you are to do them.

I hope that you enjoyed this post and found helpful and valuable information on the personal finance basics.

If you have any questions, please feel free to leave them below and I will answer them to the best of my ability.

8 Replies to “Personal Finance Basics – 10 Best Tips”

  1. Wahoo!! What a thorough post about personal finance basics. I enjoy discussing it. I myself plan to retire early, and I agree with you that saving and investing can really help to that. I think the best way to save more is to control our expenses very well and the tips you gave here is helpful to do that.
    Thank you very much for sharing this wealth!
    Blessings!

  2. Hi,

    Great page, a lot of great information especially for young couples just getting started in life. Love the lay out and images. Wish it had been around when I was younger but see a lot to help me even now in my old age.

    Thanks

    1. If you start using good spending habits, you can become much better at managing money.
      There is always more to learn, especially when it comes to budgeting money better.
      I am very happy that you found helpful information here!

  3. wow man this article is great because it relates to how I am slowly become financially-free.
    I love the fact that you talked about the tax break because it is one thing that has helped me a lot in my financial journey

  4. Wow, so much great information. I am going to use these 10 tips to help get my finances back under control. Will share with my adult children also. I’ve been needing direction on many of your tips, especially a budget.
    Blessings,
    Renea

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