Apr 28

When it comes to personal finance, there’s a lot to know. From managing money, to investing, to understanding what is going on in the economy. These 10 must know things about personal finance will help you get a handle on managing your money.

This post is for the person that doesn’t have a background in finance but wants to get started with understanding the basics.

While these are basic, they are not always easy. Take the time to think about them and truly master them.

Click here to download a list of our favorite free tools you can manage your money with today

1. Find a job that pays well.

Most people overlook this. This step seems obvious but having a job that pays you decently will do a lot for you.

It means you have a skill that someone else values and is willing to pay for. Not only that, you probably already know that if you don’t show up for work, you don’t get paid.

A very basic principle but fundamental to your success with personal finance.

“Work hard at your job and you can make a living. Work hard on yourself and you can make a fortune.” – Jim Rohn

Which leads to the second point.

2. Read books, blogs, and resources about personal finance and money.

People who are successful at managing money don’t read for fun, they read for knowledge. The internet is free. Find the best blogs and online resources to enrich your mind.

Reading more about finance will challenge you, inspire you, and give you things to talk about to others who are pursuing financial freedom as well.

Most people don’t do this. Make this a priority and it will serve you for a lifetime.

Here are our 5 top recommended books you need to have in your bookshelf:
1: The Millionaire Next Door 
2: Master the Game: 7 Simple Steps to Financial Freedom
3: I Will Teach You to Be Rich
4: The Total Money Makeover
5: If You Can: How Millennials Can Get Rich Slowly

3. Minimize expenses & pay off debt as fast as possible.

Keeping expenses down allows you to save more.

A common rule to follow for spending and savings ratio is the 50/20/30 rule.

50% of your income should be spent on necessities. This covers rent, mortgage, food, etc.

20% should be dedicated to savings and 30% towards personal.

50/20/30 is a common rule. If you want to be uncommon, save at least 50% of your income and put it towards your smallest loan with the highest interest rate.

This is not impossible. When we paid off $50k in debt in one year, we essentially put 70% of our income towards our loans and knocked them out in 11 months.

LendEdu is a great option to explore if you have student loans. It’s free and takes 3 minutes to sign up to see your options for refinancing your loans. It will not impact your credit score either, they do not do a “hard-pull”.

There’s really nothing to lose. Refinance your student loans and you could save thousands per year. Don’t waste your time searching for the best offers Pre-qualify and receive quotes from up to 12 lenders in 90 seconds. Click here to take 3 minute and do it if you have student loans.

4. Savings is your best friend. Automate it.

Once you begin saving, make it a habit.

Set up monthly deductions to be withdrawn from your account regularly.

This will reduce the stress each week for you to have to remember to schedule a payments.

It will also build your savings quickly. Save at least $1,000. Next, try to strive to have at least 3-6 months of your expenses in liquid cash.

Having this money in the bank will give you a tremendous feeling of security.

Which leads to the next step.

5. Find ways to multiply your money.

Once basic needs are covered, you can find ways to make money work for you. The easiest way to do this is with compound interest.

“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” ― Albert Einstein

Getting started with investing into a long-term savings or investment account is critical to building a nest egg.

Most people don’t understand how easy this is. Opening a high-interest savings account will help but if you want to level up, try out an automated investing platform.

Here are the easiest platforms to begin investing right now. No stock picking, no guessing markets, just simple options to take advantage of compound interest.

Acorns

Acorns is one of the coolest ways to invest your money without thinking about it. You can invest your spare change with a breeze. Before you know it, you’ll have hundreds of dollars invested and you will never even have missed the cent’s that it deposits for each debit card transaction. Earn $10 bucks right away just for signing up through this link.

Betterment

Betterment is best automated investing platform. You can set up everything in an hour or less. Perfect for beginners who want to dabble in investing but not have to do much. This is a set it and forget it platform. 

Index funds are a passive form of investing that have been more successful in outperforming most actively managed funds.

You do pay some very small fee’s each year but if you are not investing hundreds of thousands of dollars it is very affordable. Get 6 months free by using my link.

(Disclaimer: I use both platforms and love them, that’s why you’re learning about them. Even though I may get some small payment if you use my link, they are both platforms that I would recommend even if I didn’t get anything out of it.) Support the blog. Sign up through these links. Get more benefits for yourself.

Side note: if you want to explore even more money saving & investing tools visit our Free Tools page on our website.

6. Understand that investing is a long-term strategy

Even if you lose money short term, you can absolutely earn long-term. The goal is to leave the money you invest in the account so it can begin compounding over time.

Markets will fluctuate, your strategy should stay the same. Even if you are positive something is going to happen, you may be wrong. This has nothing to do with how smart you are, because when the market smacks you down, there is nothing you can do.

The key is to have other options and never commit everything to a single investment.

7. Simplify your financial world & understand yourself.

The financial world is designed to confuse you. That’s why it is so easy to get into debt but so hard to get out of it.

Don’t use credit cards unless you are diligent about paying of the balance each month.

If you are the type of person that can’t stick to that plan, don’t get a credit card.

Understand all the hidden fees and rates with every product you purchase.

8. Understand you don’t have to be smart to succeed financially.

Yes, it helps to have an incredibly high IQ like Warren Buffet. Even Buffet admits that much of his success was through luck.

There is no problem with looking up to the greats, but realize that they work extremely hard to master their finances.

This goes back to step one – if you don’t show up for work – you won’t get paid.

The same goes for personal finance. Put in the time to make the right choices and you will make progress towards your goals.

9. Learn that there is a season for everything.

It’s common to feel like everyone else is passing you by. You must learn that if you don’t own your dream house by age 30 that it’s okay.

Ambition is important but many of the great entrepreneurs and investors made sacrifices early on to build what they have now.

Taking a few years to focus on building the right foundation financially will not hold you back.

10. Understand your “WHY”

Start with why. If you are not 100% committed to something, when things get hard you will not stick to it.

Secondly, if you’re not happy pursuing a financial goal, you will never achieve it. You must have passion and the desire to make your dreams a reality.

The best way to understand your why is to think about the result. Picture what your life will be like when you no longer worry about money.

Simon Sinek’s bookStart With Why” is an incredible book to help you with this. You can also watch his TED Talk that has millions of views here.

11.(Bonus) Be okay with where you are at.

We all know people who have things easy financially. Comparing yourself to your richest friends and other celebrities on Instagram won’t get you ahead.

It’s easy to point out all the reasons you won’t succeed. What’s important to realize is that if you want to be successful with money, you must look beyond what other people have and what you don’t have.

Your mountain may be taller but when you reach the peak it will be that much more satisfying.

Personal finance is a lifelong journey. Don’t overcomplicate it. Follow these simple things and you will be on your way to financial freedom.

If you found these 10 steps helpful take 15 seconds and share it with your network on Facebook, Twitter, or any other platform you use.

For more useful tips on personal finance, check out our other posts.

Cheers,

Zack

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About the Author

Zack is one of the co-founders of FreeUp and is in charge of setting the strategy for the blog and managing the day-to-day operations. When he isn't plotting new ways to create awesome blog content, he likes to geek out about global affairs, ride motorcycles and can probably be found hiking somewhere during his days off.

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