Everyone can spend money, but not everyone can spend it right. A common misconception about personal finance is that it does not need to be taught and that adulthood comes with a certain money-handling wisdom. The reality is quite different. People get into debt, mishandle their credit, end up with zero savings and fall into bankruptcy all too often.
Browsing the internet can be overwhelming while looking for financial advice. Too many opinions, too little time. Not to worry, as this article has got you covered with some important do’s and don’t when it comes to personal finance.
Personal Finance: Do Set Attainable Goals
A cornerstone of personal finance mastery is honesty. It’s easy to get caught up in visions of a lavish lifestyle filled with caviar and expensive cars. However, few people get a jump start in life, and most have to work hard to achieve their goals. Successful personal finance management starts small and grows (hopefully) lavish over time.
Once you set aside those rose-tinted glasses, you’ll be able to view your finances realistically. Study your income carefully, and set up goals to match. Whether it’s saving up for an apartment, college, or a wedding ring, you’ll know where you stand when you’re honest with yourself and your personal finances. This might mean putting a pin in that Maui getaway idea for now, but that’s okay.
Don’t: Disregard Your Credit Score
If you ever want an X-ray scan of your personal finance, look no further than your credit score. If you’re applying for a loan, a lender is quite likely to review your credit score before deeming you worthy. If you’re thinking of getting a mortgage, a good credit score will place you at the top of the list. If you’re trying to land the job of your dreams, a potential employer won’t resist a peek at your credit either. Need I go on?
Healthy personal finance is critically dependent on your credit score, and being smart about it is sure to get you places faster.
Do: Understand your Impulses
Have you ever made a wildly expensive purchase only to regret it later? Whether it’s an extra pack of gum or an “innocent” peek into the Gucci store, we all fall for sales pitches and clever marketing tactics.
Personal finance management suffers most from impulse buying, the all-too-common practice of buying something without prior deliberation, just because.
If you’re prone to impulse buying, do not panic, as you’re not alone. Here are some steps to ensure responsible personal finance management:
- Create and stick to a monthly budget
- Write down a list of items to buy before shopping
- Introduce a 24-hour rule prior to your purchases
- View commercials and advertisements for what they are actually selling, not for the feeling they’re trying to give you
- Pay with cash to increase spending awareness
Don’t: Forget Your Emergency Fund
No one wants a rainy day, but a wise person keeps an umbrella just in case. If you want to be responsible about your personal finances, it is time to start setting aside some money (preferably each month) to avoid difficult financial situations in the future. You never know what life may hold, but it never hurts to be prepared, and have a sizable fund to rely on while you’re at it.
Personal Finance: Do Invest
If there’s anything financial advisers agree on, it’s that safe and secure investments are vital to your personal finances. A key while investing is the biggest possible return over time. Property and gold investments are arguably the safest investments. A potential pitfall, however, can be putting all your eggs in one basket. To avoid this risky road, consider investing smaller and into multiple “baskets”.