Top 10 Tips for Personal Finance Success

Many Americans live from paycheck to paycheck. Consumerism has become a way of life for many of us. And even as we find stress-relief in shopping and accumulating the latest gadgets, we are also discovering that when the time comes for us to settle those credit card bills, we get more stressed than ever. Things go from bad to worse when this way of spending isn’t curbed and we are forced to file for bankruptcy the way many Americans do year after year.

A lot of people think that living within one’s means, saving, and investing are difficult, if not downright impossible, to do. One reason why this perception is prevalent is that these concepts are not taught in schools. Research has revealed that those who graduated from high school are not equipped to manage their own finances. This cannot be blamed on the educational system alone, however, as parents should also train their children how to properly handle their money. Unfortunately, even they are grasping at straws when it comes to proper money management. How can they be expected to teach children the principles when they don’t have basic knowledge themselves?

Surprisingly, the rules of successful personal finance are quite simple. What they do require are discipline and the willingness on your end to follow them. That is where it becomes challenging. But it is perfectly doable.

Here are the top 10 tips for personal finance success:

1.       Learn all you can about managing your money. Personal finance is a whole course in itself. This is why so many books have been written about it and there are professionals who are called financial advisors or financial experts. It’s not as simple as putting coins in a piggybank. If you really want to succeed in spending your money right, saving it for the rainy days, and investing to secure your retirement, you should begin by educating yourself.

However, you should use only reputable sources to guide you. Don’t put too much credence on self-proclaimed gurus or in websites that exist only to sell you something. Read the basics and build on your knowledge by application of the principles.

2.       Follow a budget. Call it a resource allocation plan, a personal expense plan, or a financial plan. Whatever name you have for it, make sure that you create a budget that reflects your personal situation and stick to it. By having a budget, you are able to chart the course for your spending. You see where the holes are and are able to plug the leak, so to speak, early.Because you categorize where you spend your funds in your budget, you can account for where your money goes. You are also able to allocate for savings and retirement accounts. When you don’t have a budget, you usually end up with just spending everything on unnecessary purchases.

3.       Make saving a habit. Many of us don’t save because we think that savings have to be big and substantial. Instead of focusing on the amount, it is much more effective to just concentrate on the act of saving first. Save little amounts and once you have already made it into a habit, it will be much easier (addictive, even) to save larger amounts without feeling deprived.

Experts say that 10 to 20 percent of your income should go into savings. When you have standby money, you are better equipped to deal with any adverse changes in fortune—such as if you lose your job or someone in the family becomes very sick. If 10 percent seems too big an amount for you, start by saving 3 percent. What’s important is that you make saving every payday habitual.

4.       Use cash for all purchases. Our dependence on plastic money makes credit easily accessible. The problem is that swiping our cards is too easy and makes following a budget even more difficult. If you confine yourself to cash-only purchases, especially for basic needs like groceries, you will be able to literally live within your means. Once you notice the dollars and coins dwindling in your wallet, you know that you should stop spending and stretch what is left until payday comes along.

Of course, you should already have allocated your money for savings and investments as soon as your paycheck arrived. What is in your wallet is what you have for the day-to-day expenses. So if you have no extra cash left to for that brand new treadmill with all the bells and whistles, be content with your old one that serves the same purpose until you can save enough to buy a new one.

5.       Don’t say no to the opportunity to make money. We’re talking about legal and ethical opportunities, such as the chance to start your own business, invest in the stock market, or lower your debt. The earlier you start saving, the more your

money will grow and the better off you will be. When you miss these times, you’re depriving yourself of a financially secure future.Also, instead of just passively waiting for the opportunities to come to you, create them. Be on the lookout for ways to cut costs, save, or even earn more. Whether this is in the form of kicking a financially-draining and health-endangering habit like smoking or getting a second job in the weekends, make sure that you take advantage of it fully.

6.       Automate your savings. Have it deducted automatically from your paycheck and put in a bank account specifically for that purpose. This way, you will be planning your monthly budget based on what’s left. Best of all, you remove the temptation of spending it, which is what always happens even when you include it as part of your budget.

Funds allocated for your retirement like your 401k and your IRA can also be arranged this way. So even if your paycheck seems quite a bit smaller, you’re actually getting richer. The added benefit is that you only have to allocate what’s left to utilities and day-to-day needs like groceries and gas.

7.       Opt for quality over price. Most of the time, we choose price over quality when we shop for things. But there is usually a reason why one brand sells the same item more expensively than the others. Usually, that main difference lies in the workmanship and quality—it’s designed to be more efficient and/or it can last for years. Even if you may save some money for the short-term when you buy cheap stuff, it will only be draining a hole in your pocket for the long-term because of the repairs or the need to buy another one.

However, don’t immediately assume that something that is highly-expensive is always the best buy. Read the label so you get a better idea of the brand. Try to get to know a particular brand by soliciting the opinion of those who have used it before. This is easier now with the various forums in the Internet. Get customer reviews before you buy.

8.       Don’t get into too much debt. Debt is not necessarily a bad thing. It is how you get major purchases like a house or a car. Too much debt, however, is ruinous. When you start charging groceries to your credit card, when you are getting constantly delayed on your payments, when you can’t fall asleep at night thinking about the bills you have to pay, then you have too much debt. Don’t let the problem overwhelm you. It won’t go away no matter how many sleepless nights you have. Be proactive and start thinking of ways to get yourself out of the bind.

Solving a debt problem is not easy but it can be done. You just need a very strong resolve to start the ball rolling. If the problem is not that bad, you can start disciplining yourself by creating a budget. If you’re really in over your head with debt, there are other avenues like going into a debt counseling program or negotiating with your creditors yourself. You can consider filing for bankruptcy as a last resort.

9.       Always have medical insurance for yourself and your family. One of the reasons why people go into debt and eventually file for bankruptcy is because of medical and health issues that they have to pay everything for. With medical insurance, you are assured that a majority of all your medical expenses will be paid for by the insurance company. Even if you have to pay some of it, that portion is manageable or can at least be covered by your savings. If you don’t have medical insurance, however, you will lose not only your savings but get in debt as well.

10.   You can build a healthy nest egg for yourself. The secret to amassing a lot of wealth and securing your retirement is sound financial planning and discipline. You don’t have to have a millionaire father or invent social media to be very rich before you turn forty. By educating yourself about personal finance, knowing where to place your money, and saving and investing, you should have a secure retirement and pass on something to your children at the same time.

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