While everyone does not need to be a financial expert, everyone should learn a few personal finance basics regardless of their knowledge level.
It might be tricky to know what to start with since the personal finance category is pretty broad. However, there are some principles that you must master.
Today we go back to personal finance 101. These are the fundamentals everyone needs to get right. While there is a lot to explain underneath each instruction, here is a simple guideline.
Want to be financially comfortable?
- Invest & Pay off your debts
Most rules are simple, but simple doesn’t mean easy.
To Budget: Track all your expenses and income for 30 days. Differentiate between your needs and wants. Write them down. Choose expenses that aren’t important and reduce spending on them. The leftover you save.
To earn: By creating value for people in exchange for money. Value can be created through:
- Exchange your time for money by selling your skills or services.
- Creating and selling products.
- Building an audience and monetizing.
To save: Open an account that you won’t have to dip into during an emergency and pays any form of return higher than inflation. Keep contributing there for 90 days, then take it out and invest.
To Invest: Choose your financial goals and use your time horizon to choose assets you should invest in. Allow your investments to mature to reap significant returns. Never invest in what you don’t understand. There are different asses to invest in such as stocks, bonds, real estates, crypto etc
To Pay off Debt: Choose either snowball method or avalanche method. Write down all your debts with their corresponding interest rates and work out a plan that should be included in your budget to pay them off.
Different strokes for different folks
After all is said and done, you should cultivate habits to have a smooth financial transition.
- Focus on increasing your income
- Have an emergency fund
- Invest and save consistently
- Do not try to keep up with the Joneses
- Always live below your means