Some people may say personal finances basics are just that, basic and therefore we should already know them. However the truth is that common cents for one person may not be common sense for the next. Am I right?
Unfortunately I didn’t learn personal finance basics a.k.a. common money sense until I was a lot older. I’m proud to say that now I’m in a good financial place, but I haven’t always been. If I could go back and teach myself some money management skills these are the personal finance basics that everyone should know.
Save as soon as you start making money
I starting working at McDonalds when I was 15 years old and I was so excited to get my first paycheck that I went out and spent every single penny. This set the basis for the next several years of my financial life.
I really wish I saved a portion of my paycheck from the very moment I started earning a paycheck. If you live at home I think it’s reasonable to save 50% of your paycheck, once you move out that can go down to 25%.
It’s O.K. to get into debt
Yes you read that right. I truly believe the only way people will learn how to manage debt wisely is to get a credit card and get into debt. I am a hands on learner and unfortunately I learned about debt the hard way.
However it doesn’t have to be like that for everyone. If you get a credit card, use it wisely and build a solid credit history you’re looking at a happy financial future. Oh and PS it’s never too late to start over.
Think about retirement
Whether your 20 or 40 retirement should be on your mind. If you’re young there are probably several other goals you want to achieve before retirement and with a little bit of planning you can achieve them all.
The truth is the later you start saving for retirement the harder it will be so start saving as soon as possible, even 5% of your after tax income can add up to a lot of money over several years.
Try to live on a budget
This has personally never worked for me, but that’s probably because I never learned how to do it. I save for the short term, save for the long term, pay my bills and spend everything else. If that’s a budget then O.K. I do it.
I save a dollar amount that I can afford, not a percentage that I’m “supposed” to. That’s what works for me and I’m happy with it. Some others like a more structured budget and that’s O.K. too.
Take advantage of employer savings plans
If you like free money then sign up for your employer savings plan. I can say this is personal finance basics 101. If you’re employer is offering to match your contributions into a retirement plan, stock plan or other type of savings account then take it. Regardless of how the market does you automatically get a 50% return on your money. How awesome is that?