Whether you are unemployed and penny-pinching while looking for work or busy running your own company and covering payroll expenses for your employees, everyone can benefit from a little Personal Finance 101.
Creating a personal budget is essential for gathering a clear picture of how much money you bring in, what your monthly expenses are, and how much disposable income you have left over. Many online banking platforms offer free reports that will show you a breakdown of how the money in your account is being spent. Using an online budget calculator is also a great tool for creating a personal budget.
2. Cutting Expenses
Once you have created your personal budget and you have a clear understanding of where your money is going each month, it will be much easier to see which expenses you can cut back on. For example, your daily morning Starbucks run could be costing you more a month than your utility bills. Make small lifestyle changes such as bringing coffee from home in a travel mug, making a sandwich for lunch, or carpooling with a co-worker can help you lower your monthly expenses and increase your disposable income.
3. Managing Debt
It is essential if not ideal for all of us to have some debt. Taking our loans and using credit cards build your credit score and is also a smarter way to manage your resources rather than paying for large purchases with cash. However, when people borrow more money than they can afford to pay back it causes serious financial trouble. The most important thing to keep in mind when paying off credit card debt it to always pay more than the minimum payment due each month. Paying credit card minimums could end up costing you thousands of dollars in interest payments in the long run. Speaking of interest rates, always pay the credit card with the highest interest rate first in order to reduce your overall interest expenses.
Many of us feel like we don’t have enough money left over at the end of the month to save. However, with the uncertainty of social security and the increasing unpopularity of company pension plans, saving for your retirement is more important than ever. The best way to start saving is to pay yourself first. That means once you have determined a realistic amount to set aside for your savings each month, have that amount automatically transfer out of your checking account and deposit it into a brokerage, mutual fund, or retirement account. Missing this money for your checking account may hurt for the first few months but if you commit to trying this method for a minimum of 6 months, at the end of that time you should have comfortably adjusted to living without it.
We all work hard to acquire wealth and live a comfortable lifestyle. Insurance is an important part of your personal finances because even though it is an expense, it is a worthwhile expense to protect your assets. On the other hand, there are many types of insurance that are unnecessary and being over-insured can be a waste of your resources. For this reason, we recommend doing your homework by getting multiple quotes and ensuring you understand all of the line items in a policy before starting a new insurance plan. Everyone’s insurance needs are different but the four types of insurance most people should have are health insurance, life insurance, property insurance (regardless of if you rent or own), and auto insurance.