Managing your money isn’t always a fun activity, especially when you’re friends are begging you to go out on the weekend or the latest tech gadget you’ve had your eyes on hits the market. Spending your money can be very tempting, and can lead to poor financial choices. However, there are plenty of ways you can manage your money wisely, while still enjoying life’s simple pleasures. In this post, we’ll provide our best financial advice to help you manage your personal finances better.
Below, we’ll break down our top personal finance tips into three categories: the basics, budgeting, and saving. You can read through to view our financial tips to help you get your finances in order, or use the links to jump to a category of your choosing.
- Buy the Right Insurance
- Use Your Credit Card Wisely
- Don’t Forget Your Taxes
- Keep Track of Interest Rates
- Budget for College Early
- Carefully Plan When Buying a House
- Take Advantage of Budgeting Resources
- Try the 50/30/20 Budgeting Rule
Financial Advice Basics
No matter who you are, there are certain financial advice basics you should follow. Doing so can help ensure you keep your personal finances in good health. Once you have the basics down, managing your finances can become much easier. Once mastered, you can move onto some of my more comprehensive money management tips.
1. Buy the Right Insurance
Insurance can be great in unfortunate events, whether a natural disaster tears off your roof or you get in a car accident. However, too many people are often roped into insurance plans that cost too much. If someone depends on your income, buy life insurance. However, if you don’t have dependents, life insurance isn’t always necessary.
You should also consider insuring against financial disasters, not just annoyances. Buy renters or homeowner’s insurance, car insurance, disability insurance, and health insurance.
By the same token, you might want to steer clear of extended warranties, smartphone insurance, travel insurance, or payment protection plans, as these might not always be necessary and can cost you a lot of money.
2. Use Your Credit Card Wisely
Credit cards are useful but can be dangerous — kind of like power tools. Using them frequently can make it more likely that you’ll cut your thumb off, so to speak. A lot of sad stories begin, “I always paid off my credit card every month, until…” Using your credit card wisely and keeping your credit utilization ratio below 30 percent can help you keep your credit score in check.
Preserving your credit score is important, as it’s used for a variety of financial matters, such as taking out a mortgage or applying for an auto loan. With that said, make sure to check your free annual credit reports for errors. This should be a regular action you take at least once a year. By periodically pulling a credit report, you can look for any errors or mistakes that might be lowering your credit score.
Credit scores are simpler than you think. If you pay your bills on time, more than likely, you’ll have a good credit score. If you don’t, you won’t.
3. Don’t Forget Your Taxes
Nobody likes paying and filing taxes, but failing to do so can lead you into serious financial trouble. Taxes either come around once a year or quarterly, depending on your occupation. With that said, make sure you have a financial calendar that reminds you when to pay or file your taxes.
One piece of financial advice for saving on taxes is to contribute to your 401(k) or other retirement plans. Clever tax-avoidance schemes are often illegal, so make sure you’re honest and make legal choices that can save you money.
If you always hire someone to do your taxes, try doing it yourself (or use tax software) once. If you always do it yourself, try hiring someone. Either way, you might save money or learn something.
4. Keep Track of Interest Rates
With almost any financial move you make, interest rates will follow. Credit cards, student loans, mortgages, savings accounts—these are just some of the types of loans, debts, and financial accounts you’ll have that come with an interest rate. Knowing the interest rates on these various types of accounts is essential because you might be spending more or earning less on your various debts and savings commitments. It’s best to keep an eye out on your interest rates, so you know what accounts to focus on.
Financial Tips for Budgeting
Budgeting is one of the most important personal finance tips. Without a budget, you can easily be spending more money than you earn, which can make it challenging to pay off debts, save for the future, and afford an emergency expense. Consider these budgeting tips as you plan for the future.
5. Budget for College Early
Student loans are awful. If you’re a middle-class family, it might be worth considering sending your kids to a community college, in-state public university, military academy, or elite private college. This way, they won’t take on as much in student loans that can take decades to pay off.
Traditional four-year colleges are often unaffordable without taking on massive debt—and don’t necessarily provide a better education.
Retirement savings come before college savings. If you can’t afford to save for your kid’s college, don’t make it a priority quite yet. Even if you can’t afford to save now, open a 529 college savings plan for grandparents or other family members to contribute to.
6. Carefully Plan When Buying a House
Aggressively paying down a mortgage is another important personal finance tip worth considering.
The best measure of your readiness to buy a house is the size of your down payment. Be wary of making a down payment under 20%, even through a government loan program.
Stretching to buy more house than you can afford can often lead to painful and avoidable financial misery.
7. Take Advantage of Budgeting Resources
You don’t have to go at budgeting alone. Carefully tracking your finances without any help can be overwhelming and stressful. Fortunately, there are plenty of resources out there that can help you track your income and expenses and make smart financial moves. Mymoney.gov has plenty of financial wellness tips that you can take advantage of and learn a thing or two. At Mint, you can use our free budgeting app that can help you manage all of your finances in one place, including your bills, balances, and credit score.
8. Try the 50/30/20 Budgeting Rule
Sometimes, all you need is a little guidance to help you build a strong and manageable budget. A great money management tip is following the 50/30/20 budgeting rule, which goes as follows:
- 50 percent of your income goes toward your essentials, such as housing, food, transportation, and utilities
- 30 percent of your income goes toward your wants, such as a nice smart phone, entertainment, and travel
- 20 percent of your income goes toward your savings and debt repayments, such as your student loans, medical loans, and auto loans
Income management is an essential skill needed to budget correctly, and with the 50/30/20 budgeting rule, you can make this happen. With this budgeting rule, you can create a solid plan to meet your financial goals by identifying areas where you can cut or reduce expenses.
Money Tips for Saving
Managing your money can be a challenging task, especially when you have important expenses to pay like rent, student loans, utilities, groceries, and so forth. However, there are plenty of ways you can still pay for your necessities while treating yourself to things you love, all while saving. Consumerfinance.gov has plenty of smart financial tips and tricks that can help you start saving.
9. Save Early
There is no shame in using tricks to get yourself to save money. Use multiple savings accounts; put your credit card in the freezer; set up automated transfers; think of your next raise as an opportunity to save more, not an opportunity to spend more. Whatever works for you is fine. The key is to begin saving as early as you can, even if it means setting aside a few dollars in a piggy bank. Getting in the habit of saving early can set you up for financial success in the future.
It’s also important to look at your lifestyle and identify areas where you can cut expenses. Often, the best way to make saving a habit isn’t skipping lattes; it’s keeping your housing and transportation expenses low.
When it comes to saving, retirement should always be part of the conversation. The last thing you want is to enter your golden years and realize you can’t retire because you won’t have enough money to make ends meet. The earlier you begin saving, the better. With Mint’s retirement calculator, you can see how much you need to save in order to make your retirement dreams a reality.
10. Make Smart Investments
Investing can be a great way to boost your savings and make extra income that can be put toward necessary expenses. While it’s possible to beat the market, it’s often so unlikely that it might not be worth trying. Instead, consider investing in inexpensive index funds or target-date funds, as you can reduce your risk of losing large sums of money. It’s always important to avoid investing in anything that promises impressive returns with little or no risk.
You can also invest in your retirement savings. Try and max out your tax-advantaged accounts, such as your 401(k) or IRA, before investing in a taxable account. This way, you can invest in a less risky manner, all while growing your nest egg.
11. Focus on Family Finances
Couples have assorted ways of merging and managing their finances. No matter your relationship dynamic, it’s important to find common ground when it comes to managing family finances. This way, you’ll be able to make plans for buying a new home, saving for your children’s college, or buying a new car. Having said that, couples who intend to spend retirement together should consider looking at their investment portfolio as a single unit. Doing so can allow you to create a retirement plan, so that you can spend your golden years the way you’ve always envisioned.
In addition to focusing on your and your spouse’s finances, it’s important to teach your children smart financial moves to help set them up for success. For example, forcing kids to save or donate part of their allowance can sometimes deprive them of the opportunity to learn worthwhile lessons. With little financial obligations, your kids can learn from an early age what makes a financial decision risky, so when they’re older, they’ll be able to reflect on that experience and make the right choice.
12. Save for the Unexpected Emergency
You can never predict the unpredictable, which is why you want to have a plan in place should an unexpected emergency arise. Fender benders, medical bills, a leaky roof—these are just some of the surprises life might throw your way, which can leave a serious dent in your finances if you don’t have adequate emergency savings. Today, many Americans found just how important emergency savings are due to the coronavirus pandemic. With millions of workers now unemployed, savings have never been more important. To prepare for future economic downturns, you can review Mint’s recession finance tips that can help you get through any financial disruption.
To create a rainy day fund, set aside a portion of your income in a savings account that you won’t be tempted to touch. It’s recommended to have anywhere between six months and a year’s worth of savings stored in an emergency fund. This way, if you lose your job, have to buy a new car, or need to pay for an expensive surgery, you won’t face economic hardship.
- Financial advice basics: Make sure you buy the right insurance, use your credit cards wisely, stay on top of your taxes, and be aware of interest rates on any loans and savings accounts.
- Financial tips for budgeting: Set aside funds early for college, buy a house that you can reasonably afford, take advantage of budgeting resources, and try the 50/30/20 budgeting rule.
- Money tips for saving: Save as early as possible, especially for retirement, make smart investments that aren’t extremely risky, focus on your family finances, and create an emergency fund.
What would you add? Let’s hear your financial wisdom at its pithiest.