It’s easy to see the value of well-informed financial practices, but it’s not so easy to actually get informed. For many folks, personal finance ranges anywhere from a nuisance to a buzzkill to a do-not-enter-this-scary-door topic.
However, a little effort can go a long way in keeping you secure, helping you do more of what you love, saving up for a big purchase, planning for retirement, and everything in between. It’s never too late to start learning more and improving your situation.
In the United States, Tax Day falls in April, so it’s a natural time to review your finances and think about future goals. But don’t worry: the beginner-friendly tips in this guide are evergreen. You can pick them up wherever, whenever. You (and your wallet) won’t regret the time you spend going over your finances—think of it as an investment in your own peace of mind.
Find out what your expenses are
Sounds simple enough, but you might be surprised what sticks out to you when you review credit card and bank statements. Knowing what size slice of the overall pie goes into different spending categories each month is key to any budget, big or small.
Then, you’ll be able to get a sense of what’s necessary and what’s a nice-to-have. Maybe you’ll discover that the amount you spend on takeout is a lot higher than you thought when seen on a monthly scale.
Set a reasonable budget
Now that you know exactly how much you’re spending, you can judge which areas you’d like to dial back. As a general rule of thumb, you can use these percentages to compare with your current monthly expenses:
- Housing: 25-35%
- Food: 10-15%
- Transportation: 10-15%
- Insurance: 10-20%
- Utilities: 5-10%
At the end of the day, budgeting is a set of personal decisions. If you highly value a comfortable home, you may set aside more of your budget for housing. But if you’re super active and on-the-go a lot, you may be able to spend less on housing and more on travel or nightlife.
When you pinpoint an area where you want to cut spending, try to set attainable and incremental goals. You don’t have to swear off buying new clothes for a whole year just to feel like you’re making progress. In fact, a moderate change is actually more sustainable in the long run. So if you’re a habitual shopper, try limiting yourself to one new item per month.
Set up a rainy day fund
Life is unpredictable. It’s always a good idea to have some backup cash in case of a surprise medical bill, or even a surprise destination wedding invitation. If possible, you may want to have two different savings accounts: one for your rainy day savings, and one for savings savings. Otherwise, it may be difficult to keep track of what’s spendable and what’s for the future.
For both kinds of savings, remove the guesswork by going automatic. You can decide on a set number to put away each month, or a set percentage (like 10% of each paycheck). Don’t be afraid to start small! Committing to put away just $5 a month will get you in the habit of saving.
Find a financial community
Investment groups aren’t just for stock market experts. These communities can help you:
- Build your credit
- Get approved for a mortgage
- Create your own business
- Plan for future generations
- Earn passive income
To change your relationship with money so that you are more empowered, check out groups like Financial Literacy for the Family and Networking and Financial Workshop. Their online events cover the basics of personal finance. If you’re interested in higher level finance, you can join a group like Houston Wealth Factory or Money Schmucks An Investors Book Club. These communities can teach you how to get involved in real estate investment and the stock market.
Be consistent
Financial stability is a lifelong pursuit with ups and downs. It’s better to commit to small positive changes than to take drastic measures that you may struggle with and give up on. The best way to hold yourself accountable is by finding people who understand what you’re going through. One day at a time, you can improve together.
Last modified on April 14, 2022
