There’s a good reason so many people search for personal finance advice online. It’s easy to feel overwhelmed by money, whether you’re trying to save for retirement, pay off student loans, or simply make ends meet. But managing your money doesn’t have to be stressful. With a few simple tips, you can get your finances in order and start building a brighter future. We’ll explore those helpful strategies in this comprehensive guide to getting control of your money. You’ll gain more confidence as you work toward your money goals.
Basic Personal Finance Advice
Managing your money isn’t about deprivation. Instead, it’s about making informed decisions and being strategic about your spending, saving, and investing. To set the stage for your successful financial journey, you’ll need a good foundation.
Create a Budget
The cornerstone of solid personal finance advice? Having a clear view of your finances. Creating a budget is an easy way to gain a deeper understanding of where your money is going. Track your income and expenses to create a clear plan for how you’ll spend and save your money each month.
Track every dollar that comes in and goes out. This might feel like a tedious process at first. But stick with it and you’ll get a feel for where your money goes each month. Having a realistic budget will help you stay organized.
It will also help you identify any unnecessary spending or areas where you can make some adjustments. For example, you can use your tax return to beef up your savings account, or that money could go toward your loan payments. Consider setting up overdraft protection to avoid extra fees.
Pay Yourself First
Michelle Perry Higgins, a principal and financial planner at California Financial Advisors, encourages young adults to create healthy financial routines. One key piece of advice is to “pay yourself first,” a financial strategy in which you automatically put a specific portion of your income directly into a savings or investment account before spending anything on expenses or nonessentials.
This helps you make savings a priority rather than an afterthought. Many experts suggest setting aside at least 20% of your paycheck for savings and financial goals, as outlined in LearnVest’s 50/20/30 budget strategy. That 20% can include contributions to a retirement account, too.
This will also help you increase your net worth faster, which refers to the total value of your assets minus any liabilities you might have. To calculate this, add up all of your assets like checking accounts and savings accounts, and subtract any debt.
Build an Emergency Fund
An emergency fund is essential because unexpected events will pop up. From car repairs to medical emergencies or job loss, financial challenges will come your way. An emergency fund provides a safety net so that unexpected costs don’t derail your financial progress.
How much should you save in your emergency fund? A good starting goal is to aim to put away 3–6 months’ worth of living expenses. Having that extra cash in place will not only offer peace of mind, but it’ll also prevent you from going into debt when unforeseen circumstances arise.
If putting away that much feels daunting, start small. You can have a certain amount from your monthly income automatically transferred into your emergency fund.
Intermediate Personal Finance Advice
After covering your financial basics, you can begin applying intermediate-level personal finance advice that will take you even further.
Manage Debt Wisely
This piece of personal finance advice isn’t always glamorous but it is necessary. Take stock of your debt — credit cards, student loans, car loans, personal loans — and create a plan to pay it off as soon as possible.
It’s smart to prioritize the debt with the highest interest rates while maintaining minimum payments on other accounts. For many people who graduate from college, this means creating a plan to start paying down student loans, which average more than $36,000 per person.
Having bad credit can feel disheartening, but there are things you can do to start improving your score. You might consider becoming a member at a credit union, which tend to be more flexible than banks.
Understand Your Credit Score
Your credit score plays a big role in your financial health. It impacts the interest rates you’ll receive when you apply for loans. Lenders will assess your creditworthiness based on your score, so it also determines if you’ll qualify for credit at all.
It also factors in when you rent a home, and even affects insurance rates. There are several credit reporting bureaus that track financial information for each consumer to help determine the score.
Monitoring your score regularly helps you keep track of your creditworthiness and will alert you if there are any errors that you might need to resolve. You can use a free service like Credit Karma to check your credit score regularly. Paying attention to your score is a vital aspect of financial literacy.
Save for Retirement Early
When it comes to personal finance advice, it’s easy to overlook the importance of preparing for the future. While retirement might seem distant, it’s never too soon to start saving. You’ll take advantage of the powerful magic of compounding — which allows interest earned to accrue more interest over time. This helps your money grow more quickly.
One helpful resource you might refer to for more in-depth information is the “2022 Hot Topics in Retirement and Financial Wellbeing.” Even delaying retirement investing for just 10 years can have a significant impact on how much you’ll have when you’re ready to retire.
Getting started at age 22 versus 32 makes a huge difference — starting with $5,000 annually can leave you with twice as much saved by the time you’re 67. One easy place to get started is by opening a Roth IRA, a type of investment account. There are also income limits on who can contribute to a Roth IRA (up to $140,000 for individuals and up to $208,000 for married couples).
Advanced Personal Finance Advice
Ready to go deeper with personal finance advice? Then it’s time to focus on strategies to protect and grow your money more efficiently.
Investing
Consider different types of investment opportunities like the stock market, mutual funds, index funds, and real estate. You’ll diversify your assets to minimize risks. Diversifying involves putting your money into multiple assets so you’re not fully relying on just one.
That means if one market isn’t performing as well as others, you’ll likely still be generating money with other assets. One smart move is to look into using an online broker — many have videos, quizzes, and learning labs right on their websites.
Here’s a breakdown of various types of investment options:
| Type of Investment | Description | Potential for Growth | Potential Risk |
|---|---|---|---|
| Stocks | Shares of publicly traded companies. Investors earn a portion of the profits when companies are doing well. | High | High |
| Mutual Funds | Professionally managed, allowing for easy diversification across different companies. | Moderate to High | Moderate to High |
| Index Funds | Type of mutual fund tracking a specific market index, resulting in more predictability. | Moderate to High | Moderate |
| Real Estate | Physical property purchased with an expectation that the property’s value will appreciate over time. | Moderate | Low |
It’s essential to research investment options carefully and consider consulting a qualified financial advisor to make informed decisions tailored to your specific goals and risk tolerance. The Charles Schwab Modern Wealth Survey 2023 showed that only 28% of Americans work with a financial advisor. However, seeking support from a professional is often helpful, especially when your assets grow.
Tax Optimization
There are steps you can take to make sure you’re managing your taxes strategically. A great first step is to review state income tax rates in your state to see how taxes work where you live. Then consider strategies that will save you money in taxes throughout the year, like taking advantage of any tax deductions, and understanding tax brackets so you’re making financially wise decisions when you buy or sell property or investments.
Refer to the latest IRS data for tax inflation adjustments in any given year. These adjustments account for inflation to keep your tax burden aligned with current economic conditions. This information changes every year, so be sure you’re referencing data for the current year. CD rates have also been higher this year, so that’s something else to consider when reviewing your finances.
FAQs About Personal Finance Advice
What are the 5 basics of personal finance?
The five basic steps of personal finance advice are budgeting, paying yourself first, building an emergency fund, managing debt, and planning for retirement. These will establish a foundation for a secure financial future.
What are the best personal finance tips?
Personal finance advice will look different for each individual. However, one key is making wise spending choices and creating healthy saving habits. It’s important to start building good money habits early to take advantage of compounding. Always prioritize paying off high-interest debt and investing strategically for the future. There are plenty of great finance books that teach the basics.
What is the 30 30 30 rule personal finance?
There is a financial strategy called the 50/30/20 rule, but the 30/30/30 is not an established rule. There’s also the 70/20/10 rule, which breaks down how you allocate your money. The rule states that 70% should go towards monthly expenses, 20% for saving and investing and 10% for debt repayment or donating. It can feel scary thinking about medical bills and the rising cost of healthcare. One smart strategy is to consider putting money into a health savings account (HSA) so you’re prepared for these expenses.
What is the 70 20 10 rule for personal finance?
The 70 20 10 personal finance rule, like other budget models, provides guidelines for allocating your after-tax income. The goal is to spend 70% on essentials and non-essentials, put 20% toward savings and investments, and allocate 10% to pay off debts. This simple breakdown can help you control your money while ensuring you make wise decisions that prioritize savings and getting rid of debt.
Part of that 20% you’re putting toward savings and investments can include your retirement contributions, but it’s also a great idea to think about saving for other goals. For example, maybe you’re planning a dream vacation, need a new car, or want to buy a home. Having a vision board of your goals is a fun way to stay focused.
Conclusion
Taking control of your finances can have a major impact on your life, providing financial security and allowing you to achieve your long-term goals. From making wise spending decisions to setting up smart saving and investing strategies, there are many approaches to follow when navigating personal finance advice.
And seeking support from resources like budgeting apps, financial planning services, or a trusted advisor will further simplify your money management journey. Learning about money market accounts can help diversify your portfolio, and you can even look into putting money into the money market. Make sure you’re exploring all of the best options for your financial situation.
