3 Essentials for Managing Your Money - Personal Finance Tips for Beginners
If budgeting and preparing expenses using spreadsheets sounds like tasks only an accountant would do, think again. The good news is that you don’t need to create complex spreadsheets and use financial accounting formulas to get your money on the right path! Keeping track of your personal finances - even if you have an accountant - is essential to your financial future.
It not only gives you a keen awareness of your money situation but also increases your chances of making smart spending and investment decisions.
These crucial tips will help create a secure financial future for yourself and your family.
Spend Less Than You Earn
Although this tip sounds straightforward, you may sometimes find it daunting to actually put it into practice. However, reevaluating where you're spending money can significantly increase the scope of your earnings and help you live within your means.
The best way to get started is to write out all of your monthly expenses and see how this compares to your monthly income. This crucial first step will help you determine the current state of your personal finances.
Take a second look at this list and see if you have any expenses that can be eliminated or reduced. Be honest with yourself. Which costs show wasting your money on things that aren't even important to you? Focus on keeping what's important to you and eliminating the rest.
For example, while there's nothing inherently wrong with spending five dollars per day on a Frappuccino, if your income doesn't support this kind of spending, it may be in your best interest to do without this small luxury for the time being.
You can use free budgeting programs like Mint by Quickbooks or invest in a good budgeting program, like Quicken or QuickBooks, to help you keep track of your spending and simplify the task. Personally, I find the free version of Mint by Quickbooks to be acceptable for my monitoring of personal finances.
Make Your Money Work For You
This can be as simple as taking advantage of the compound interest offered by most savings accounts.
My personal favorite high-yield savings account and the one I use is Marcus by Goldman Sachs.
Making sound investments can help increase your annual income by over 5%. You don't need to invest aggressively to get this kind of return. You can open an account for free and start investing with as little as $100 with M1 Invest.
Protect Your Money
Ensure that you have a plan to protect your assets in case something unforeseen happens. There's nothing worse than working hard for your money and then losing it due to poor planning and shortsighted investments.
Slow, steady, and boring win the race with respect to your personal investing strategies, but it can also put your money at lower risk.
Beware of any instant growth opportunities or investment clubs that promise overnight fortunes. These may include seminars with "self-made millionaires" that pressure you into signing up with a program that might not be a legitimate source of income. Think of Andrew Tate’s Hustlers University. Take the time to research investment opportunities before you commit your money to them.
Consider obtaining renter or homeowner insurance to help protect your assets.
Knowing how to manage your money is fundamental to any successful long-term personal investment strategy.
If you take just a few hours to analyze your spending habits, you may surprise yourself with how much money you can save! You can then invest these savings in a way that will help you see returns year after year.