Ahh personal finance. A topic that people don’t like to talk about or admit they don’t know much about. There is so much information available and if you don’t know much about finance, it can be really overwhelming! I mean how do you even know where to start when it comes to personal finance?! Lucky for you, I was in that same situation once and had no idea what I was doing when it came to my finances.
Fast forward to now and I can honestly say that I am happy with where I stand financially. Don’t get me wrong, I should definitely stop spending money on shoes but I am who I am!
Before I start let me clearly state, I’m not a Certified Financial Advisor and I’m not claiming to be. I am also not telling you to apply all of these personal finance tips to your own life. Everyone’s financial situation is different and I am simply sharing personal finance tips that have helped me be in a financial situation that I am happy with.
If you would like to learn more about a certain account or feel that you could benefit from one of these tips, I encourage you to explore your options but please make any financial decision because you feel like your personal financial situation could benefit from it, not because you saw it on the internet or think you should be doing it because other people are.
1. The 50/30/20 Rule
When I graduated from college and started my first real full-time job, I was making more money than I had ever made before. On top of that, I was living at home and not paying rent which caused me to be super frivolous with my money. I wasn’t saving any money, wasn’t enrolled in my employers 401(k), and I would pretty much buy whatever I wanted.
Fast forward to when I was starting graduate school and working a minimum wage part-time job, I quickly realized that I couldn’t spend money like I used to. Not just because I couldn’t afford to but because the way I treated money was dumb and not smart for my future.
I started implementing the 50/30/20 rule into my budgeting and saw a huge shift in how I viewed money. I now always look at price tags before buying anything and saving money is a huge priority for me. This rule doesn’t apply for everyone but it’s a great starting point if you’re trying to budget.
If you would like to learn more about the 50/30/20 rule, check out this Ellevest Article.
If you love planners and like to write things down check the Budget Book from Erin Condren below. It helps you keep track of your spending every month and it’s cute so that helps.
2. Invest In Your Future
I don’t want to work forever and I’m sure you don’t either. That is why it’s important to save for your retirement. Even if you are only able to save a little bit for your retirement, every bit counts. The first retirement account you should look at is your employer 401(k). If your employer offers a 401(k) match, definitely take advantage because it’s basically free money!
Another popular retirement account, especially for those who are self-employed or do freelance work is an IRA account. I love Roth IRAs because you can withdraw your contributions before retirement without a penalty. It’s nice to know that I have access to that money should I ever need it.
Visit this Ellevest article if you want to learn more about the importance of investing in your future. If you want to learn more about Roth IRAs and the difference between a traditional IRA and a Roth IRA, check out this article.
3. Healthcare Is Expensive!
If you qualify, open a Health Savings Account to help cover any of your medical bills. Some of you might be asking, what is a Health Spending Account (HSA) and why do I care? An HSA is a special savings account for people who have high deductible medical insurance plans. These special savings plans help pay healthcare costs and are tax-free, as long as you are using the money to pay for qualified medical expenses.
Learn more about HSAs and find out if you qualify here! The reason these savings accounts are so beneficial and worth putting money into is because they are tax-free, roll over year to year, and you the money you don’t use can be invested for even more added growth. Yes please!
4. Build Your Credit
Building credit is one of the most important things you can do for your future when you are young. I remember on my 18th birthday, I went to Victorias Secret and opened a credit card. The limit was only like $200 but that low limit credit card helped me establish my credit and give me the great credit score I have now. It’s also important to update your income on your credit card account when you get raises so your credit line can increase as you earn more money.
If you want to learn more about how your credit score is calculated, ways to increase your credit score and more, check out this article from Experian.
If you don’t have any credit history or are looking to open your first credit card, I recommend heading to your local credit union. Credit unions are typically more willing to helping you establish credit and typically have better rates than banks. You can learn more about credit unions and find one by you by visiting makeyourmoneymatter.org.
5. Save, Save, Save
Did you know that 57% of Americans have less than $1,000 in their savings accounts? That is absolutely mind-blowing to me considering there are so many things that can happen to you that cost more than $1,000. I’m thinking a car repair, a trip to the ER, a home repair, the list goes on! This is why it is important to have an emergency fund or a savings account.
Everyone’s financial situation is different and depending on whats going on in your life will depend on what kind of savings account you should have or what you’re saving for. Here are a few different options if you’re looking to start saving.
- You’re saving for a specific goal like a down payment on a house or a new car. Check out Ellevest. Ellevest looks at your specific financial situation and asks you to pick personal finance goals that you are trying to reach (starting a business, buying a house, kids, etc). It’s a great way to get guided finance advice.
- You want to incrementally save but also invest. Check out Acorns. Acorns is super affordable (starting at only $1 a month) and automatically invests your change from everyday purchases to your investment account. For example, you buy a coffee that was $3.30, $.70 cents would be transferred to your Acorns account automatically.
- You just want to save money in a good ol’ fashioned savings account. Check out your local credit union. Credit unions often offer better rates than banks, plus they help your community and often give dividends to members. Be sure to set up an automatic transfer from your checking account to your savings account and if possible hide your savings account from your online and mobile banking. Not all financial institutions can do that but if it’s possible, take advantage of it. That way you are not tempted to spend that money frivolously. Think of it as, out of sight out of mind.
6. Not All Credit Cards Are Equal
Before I even start to talk about credit cards, here is where I stand on using credit cards. If you can not pay the balance in full every month or are currently in debt, I do not recommend using credit cards. I recommend to only use cash so you can keep track of your spending and budgeting. I currently have 5 credit cards, a mix of store credit cards and bank credit cards, and I pay my balance in full every single month. While it may be tempting to sign up for credit cards to get a sign-on bonus or extra discount at a store, if you can’t pay the balance in full every month I don’t think you should sign up for it. When it comes to credit cards, my philosophy is: Don’t spend money you don’t have.
Not all credit cards are the same and it’s important to think about what you want from a credit card before you pick one. Here are some things you should ask yourself..
- What kinds of rewards does this card offer?
- Is there an annual fee?
- What is the APR?
- Where can I use this card?
- If it’s a store card, how often do I shop here?
In my case, I value travel and want a credit card that offers great travel rewards and perks. In my opinion, the Chase Sapphire Preferred card is the best for travel rewards so I use that credit card. I also shop at Target a lot (probably too much) so it makes sense for me to have the Target Red card because it offers 5% off your purchase and free shipping.
If you aren’t sure which credit card to get The Points Guy has a ton of information about credit cards and their rewards programs, as well as annual fees, APRs, etc.
Still want to learn more personal finance tips? Check out these books, which are best sellers when it comes to personal finance!
Do you have any personal finance tips that you wish you knew sooner? I would love to hear about them in the comments!
