Personal Finance Basics
The most important rule of managing your personal finance – without a doubt is simply to spend less than you make. Sounds easy, but you’d be surprised at how many people break this rule on a regular basis. This article discusses the basics of personal finance that may help you to avoid doing the same.
“Spend less than you make.” You’ve heard it a million times, it’s the #1 rule listed when you’re looking for personal finance help. It’s simple, it’s basic and it’s correct. That is basic math, everyone comprehends that. The problem becomes how do I apply that to real life situations, how do I apply that helpful tip to my life?
Most people have things they can cut from their lives to save money. If you look closely at your finances you can find ways to save money. We have plenty of apps and tools to account for our spending habits. Check out our Simple Personal Budget spreadsheet and start keeping track of your income vs expenses. You’ll be surprised at where you can save, just by acknowledging what you spend, and where you can easily save.
Although this is an important money managing skill to acquire, skipping the $5.00 coffee won’t lead you to financial freedom. You can only cut so many expenses out of your life. But, you can always make more money. Look for ways to increase your income, if even a little here and there. Ideally, the more sources of income, the better. Check out our article on 4 Easy Side Hustles for a few ideas to get your mind moving in the right direction.
Basics rule #2 of managing your personal finances is a bit of a given, and goes hand-in-hand with rule #1 – Set a budget
The first rule doesn’t work without rule number #2 when it comes to managing your personal finances. You have to set a plan for your money. The word “budget” is often viewed as a negative word. It is associated with restriction. We need to change the negative context. No company could survive without a money plan. They would spend aimlessly, without no idea of how much was too much.
Take your fixed and flexible expenses from your income to figure your disposable income. Make sure to include some type of savings. The easiest way to calculate this information is with a spreadsheet as discussed above, but there are a number of personal budgeting apps that are able to downloaded from either the Apple App Store or Google’s Play Store for android users.
Budgeting won’t work unless you have motivation. What are you working towards? A vacation, a new house or car? This motivation will keep you on track.