3 Personal Finance Tips For Beginners
June 9, 2022
What are the personal finance tips for beginners?
- Create a budget
- Know your financial wants and needs
- Have an emergency fund and have a dedicated account for it
With all the information available online, managing one’s budget and savings has never been more accessible. Anyone can take a more active role in managing their finances if they want to. But with the abundance of financial advice out there, beginners can feel overwhelmed. Not sure where to start? In this blog, we list down three expert personal finance tips for beginners. Remember that it’s never too early to save for your future!
Create A Budget
Without a doubt, one of the best personal tips for beginners is to create a budget.
The good thing about creating a budget is that it helps you understand your financial power. To create a budget, you will need to look at all your expenses and income. By doing this, you can determine how to adjust your spending in order to fit your budget.
Know Your Financial Wants And Needs
The financial problem that most people experience is running out of money due to spending on unnecessary items. Therefore, if you want to stay on top of your finances, you have to know your wants and needs.
Financial needs refer to expenses that are essential for you to be able to live everyday. These are usually recurring expenses. Some of the common expenses that fall under the financial needs category include transportation, utilities, food, and housing.
Financial wants refer to expenses that help you live more comfortably or enjoyably. You can leave without these and they are often bought for leisure. For example, food is a need to live, but eating out everyday is more of a financial want. Some of the other common expenses that fall under the financial wants category include luxury travel, designer clothing and accessories, entertainment, and expensive coffeehouse drinks.
It’s important to note that financial wants and needs won’t be the same for every person. For example, you may need a luxury car to drive clients if your job requires it. So how do you budget for your wants and needs? As a general rule of thumb, follow the 50/20/30 rule.
The basic rule of the 50/20/30 is to divide your money: 50% on needs, 20% on savings, 30% on wants.
Have An Emergency Fund and Have A Dedicated Account For It
There are endless situations that can place you in financial struggle easily. For example, you might suddenly lose your job, lose a loved one, develop a sudden medical problem, need a major household repair, or even have a startup business that fails. That’s why it’s important to have an emergency fund.
As its name suggests, an emergency fund is a personal budget set aside from unexpected spendings. It is a safety net in times of financial distress. An emergency fund is typically amounting to three to six months of living expenses.
Having an emergency fund can be very challenging for many people. You may have to cut down your expenses significantly or even have another stream of income just to manage it. Nonetheless, you’ll be relieved to have an emergency fund during future mishaps.
Also, consider placing your emergency fund into a dedicated account where you can earn higher interest rates. Make your money work for you.
It’s never too early to stay on top of your finances. If you’re just starting out, follow these three personal finance tips for beginners by Benito Keh and plan for your future financial success!