The best personal finance tips and literacy are essential if you want to get ahead in the path of financial success.
It is necessary to keep track and control your finances to ensure your financial stability.
To do this, you may need to curtail certain habits to manage your finances better and tame your money.
There are essential dos and don’ts that you should be aware of to improve your financial health.
This article ultimately lists the 20 important personal finance tips designed to help you stay in control of your finances, grow your finances, and live your best financial life.
What is Personal Finance?
Personal finance is all about managing your financial resources, saving, investment, and plans for your financial future.
It also covers banking, budgeting, mortgages, insurance, and tax and retirement planning.
Every financial decision you take, be it trivial or grand, all have an impact on determining the overall wellness of your financial health.
Related: 50 Personal Finance Vocabulary You Should Know
Personal Finance Tips for Financial Success
1. Get Paid for Your True Worth
This first tip sounds logical, and perhaps you might feel this is something everyone who cares about tracking and ensuring stability in their finances should know.
Nonetheless, the truth is the majority of people struggle with this commonly known rule.
For those who earn through their skill (e.g., photographers, web designers, writers, etc.), before giving out the financial value for your skill worth, conduct research on the monetary value of your job worth in the marketplace.
Your research may include the valuation of your skills, the tasks and efforts required to carry out your job, the productivity, and the going rate to your client who needs your service.
Your client could be an individual or a company.
Being underpaid is not healthy for your financial life; it could have a significant mounting ramification in the long course of your working life.
2. Spend Less Than What You Earn
Notwithstanding the amount you make, however little or big it is, you will never get ahead in your path to financial success if you spend more than you earn.
Many Americans are victims of this. For example, the U.S survey data states that 19% of Americans reported that their household did spend beyond their income.
If you genuinely care about taking control of your finances, you’ll realize that it is easy to spend less than earn more.
With a bit of effort and discipline, you could cut down unnecessary spendings to give way to a rise in your savings.
3. Stick to a Budget
In trying to get right on the path to financial success, a prudent spending habit is necessary.
What is a better way to keep a balance check on your spendings than sticking to a budget?
A budget means you are telling your money what to be spent on and not the other way around.
Budgets help make it easier to track your spending and efficiently achieve saving goals.
No matter how little or how big you earn, be it a couple of hundred dollars or thousands of dollars, you need to set up a budget and stick to it to get ahead financially.
Sticking to a budget is an important personal finance management tip to master to know and control where your money goes.
4. Have a Savings Plan
Having a healthy savings account is integral in the build-up of your financial fortunes and success.
As famous American businessman and finance author Robert Kiyosaki stated in one of his best-selling books, Rich Dad Poor Dad, “pay yourself first.”
When your income comes in, set aside at least 5% of your earnings into a separate account. It should be the first thing to do and not the last.
If you don’t have the discipline to enforce this to have a healthy savings account, you’d be shooting yourself in the foot towards your goal of achieving financial success.
5. Pay Off Credit Card Debt
He that is in debt is a slave to another. True indeed. Debt is an enormous weight on your financial health and can be a great hindrance to your financial growth.
One common form of debt in this modern age is credit card debt. The convenience of spending with that piece of plastic can be tempting.
You can easily spend largely beyond your intended budget with the blind resolve that you will pay the balance off quickly.
The sad reality is most credit card holders do not end up paying the balance off quickly as they might have resolved.
It is safer to dodge the financial bullet of credit card debt than to struggle to get out of it.
However, if you are deep in it, pull yourself out by clearing your debt as quickly as possible.
6. Contribute to a Retirement Plan
Planning is the key to financial success, and in this case, early planning for your retirement days ensures financial stability when you no longer receive income.
Several employers offer their employees a form of employer-sponsored retirement savings program such as the 401k plan.
You should contribute to such a retirement plan if you can spare the financial resources to see it done.
However, if your employer doesn’t offer you any form of retirement plan, you should consider an IRA.
Remember that your savings of today are lending to your future self.
Related: How To Retire Early In 15 Practical & Easy Ways
Savings and contributions to a retirement plan are just a safety net for future financial needs.
The idea to retire young and rich is almost every American’s dream, and sincerely just savings and a retirement plan would not cut it out.
Additionally, depending on one job is financially risky, for the event your one source of income fails, you’d have no financial back-up of other means of earning.
So it is wise to put some of your money into other investments to avoid this common financial dilemma.
You may think after cutting out a percentage of your income for savings and retirement contribution, can you still really set aside money for investment? Remember, “pay yourself first.”
8. Maximize Your Employment Benefits
A fact about employee benefits such as the 401k plan is that they are worth great monetary value.
So it is advisable to make the most advantage by maximizing yours and see the ones that save you money by reduction of out-of-pocket expenses.
9. Review Your Insurance Coverages
There may be a need to re-evaluates your insurance coverage as you may be paying for too much life and disability insurance than you necessarily need.
Most of the time, these additional insurance needs you don’t necessarily need may be coverage to car loans, buying life insurance when you have no dependents or buying whole-life, or even buying whole-life insurance policies when life-term in your situation is the best choice.
Reviewing your insurance coverage could save you a lot of money.
10. Update Your Will
A survey in 2020 showed that only 32% of Americans had a will.
It is necessary to have a will for those with dependents, notwithstanding how little or how abundant of assets they own.
A will legally puts your assets into the ownership of your loved ones in the event of your demise.
For those who own little, you can get your will using softwares such as WillMaker from Nolo.
11. Keep Records
Keeping track records of your personal finance gives you the advantage of claiming all allowable income tax deductions and credits.
This will save you the hassle of scurrying through records at haste at tax time which you likely might miss out on items that could have saved your money.
12. Seek Advice
As stated in tip 7 above, investment is a way to increase your wealth. However, investment is another deep ocean to sail through and stay afloat.
Many entrepreneurs have made wrong investment calls that have cost them their financial livelihood.
This is where you need advice before making that crucial investment decision that may make or break you.
A reputable financial planner would help you with investment ideas and plans that fit your budget.
Also, a good business adviser who is or has been involved in whatever chosen field of investment you are venturing into would be helpful.
13. Set Financial Goals
Another personal finance tip to lead you on the path of financial success is setting financial goals and aiming to accomplish them.
Doing this keeps you financially motivated and, upon achieving your goals, inspires you to set another.
However, in setting financial goals, be realistic in the goals you aim to accomplish. Do not set outrageous goals.
If it is your first time setting financial goals, I’d suggest targeting something small and building up your way from there.
An example is making a target to save up to $1,000 within a reasonable time frame.
You should set both short-term and long-term goals and keep track of your progress.
14. Have an Emergency Fund
It is financially wise to have money set aside to tackle emergencies. Emergency funds are pretty different from your savings.
Your savings is meant to be a means to open up another source of income or investment. Emergency funds are strictly for financial emergencies.
For instance, your mobile phone gets stolen, or your car breaks down, or it could be your roof coming down after a storm, or worse, if you lost your job.
You do not want to dip into your savings every now and then to tackle situations such as these, hence the need for an emergency fund.
As much as possible, set up emergency funds that can cover 3–6 months’ living expenses. You can’t predict an emergency; however, you can prepare for one.
15. Know Your Net Worth
Trying to figure out your actual net worth can prove a little tricky, but it is pretty easy. Your net worth is your total financial worth.
If you were to sell everything belonging to you and pay off anything or debt you owe, the remaining sum is your net worth. Therefore, net worth = your assets subtracted from your liabilities.
It is essential to know your net worth. It gives you an overview of your financial value.
When you know your financial worth, you’d be in a better position in making financial decisions and plans.
In the case, you’ve calculated your net worth and the results are negative, you should review your budget and devise a plan to increase your net worth.
16. Create a Financial Calendar
The goal of creating a financial calendar is to remind you of both critical and trivial financial tasks that need to be carried out.
Such tasks could be paying quarterly taxes or a periodical review of your credit reports.
17. Get Clear About Your Debt
Debt is harmful to your financial health and not just credit card debt but all forms of debt (excluding good debt). Therefore, it is imperative you clear off your debts.
However, before making that move, you need to get clear about your debt. You can start by listing down in writing the total amount of everything you owe.
This should include interest rates, monthly minimum payments, and any loan you’ve taken in and their payback lengths.
Related: 100 Famous Quotes About Debt To Make You Wiser
18. Pay Off Your Debt
Once you’ve got a clear review of your total debt, you need to pay them off. In paying off your debt, there are two strategies to follow: debt avalanche and dept snowball.
With the avalanche method, you keep up with the minimum payment on all your debts, but your financial emphasis is on clearing off debt with the highest interest rate first.
The avalanche method’s sole aim is to cut down the amount of money you pay back overall.
The Snowball method on the other hand have you focusing on clearing your smaller debts first, not minding the interest rates.
However, you may wind up paying more overall. But the achievement of being able to clear your smaller debts will empower you to pay off the rest of the debts faster.
19. Invest in Yourself
Before or after delving into investment in stocks or cryptocurrency, or any other form of investment, you may want to consider investing in yourself.
The goal of investing in yourself is to set yourself up prepared for a business establishment of your own or career path.
You should spend your financial resources developing your skills and education, which will allow you to increase your income over time.
20. Plan Your Finances With Your Significant Other
This personal finance tip is often overlooked, but it is as much valuable in keeping the threshold of your financial life as any other tip on this list.
Suppose you have a partner whose finances are intertwined with yours, such as your marriage mate.
In that case, it is a must for you both to discuss your finances with each other because every asset belonging to any of you is jointly owned.
For this reason, you both need to be on the same page on your long-term financial goals.
Final Thoughts: Manage Your Finances
Managing your finances is a must for financial progress.
Do not wait until your finances has gotten the better of you before taking charge.
Hopefully, the above personal finance tips for financial success, when put into practice, will put you in a better position financially.
You may not be able to implement these tips at once, but steadily taking small actions along the way will see you through and prevent financial mismanagement on your part.