“Personal finance is only 20% head knowledge. It is 80% behavior.” – Dave Ramsey
Personal finance is something that college never teaches you. It is something you pick up as you go once you start earning money. The problem with learning it by ourselves is that some learn it quite the hard way. Personal finance is all about how you handle your current wealth while preparing for the future at the same time.
In this article, you’ll discover 8 personal finance tips that will help you build your net worth and avoid financial pitfalls. Many of the tips will seem like common sense but are often not applied because people are emotional about money.
Study the tips below. Remember them and most importantly, make them a part of your life.
1. Pay your bills on time
Sounds straightforward, yet millions of people are late on their bills and end up paying late fees, penalties, added interest, and so on. It is not that most people don’t earn enough to pay their bills on time. It happens more often when people lose sight of their priorities. What you think as one month’s late fees will get piled up over time and get too overwhelming for you to handle.
The simple way to avoid all that – never miss a bill payment in your life. Paying your bills on time will not only save you money and give you confidence and self-respect, but you’ll get peace of mind knowing that debtors are not going to hound you.
2. Watch your expenses
Yet again, more common-sense advice that’s easily forgotten. In the words of Jay-Z, if you can’t buy it twice, you can’t afford it. Watch your expenses like a hawk. If you can’t afford to pay for a purchase with cash, do NOT put it on a credit card. If you do use a credit card, always pay the bill in full every month.
Do not have an outstanding balance and just pay the minimum sum on it. It’s very easy for your credit card debt to get out of control.
Check out this article on the 4 Simple Ways to Reduce Expenses.
3. Buy in bulk
It’s always cheaper to buy items wholesale and in bulk. Places like Costco are perfect for buying items at a low price. It may seem like you’re spending more by buying in bulk, but you’ll actually be saving in the long run.
Items like toilet paper, soap, etc., are household items that you’ll use daily throughout the year. Buy them in bulk and you won’t have to keep buying them and paying more.
4. Pay your taxes
Like Jesus said, “Render to Caesar the things that are Caesar’s” and no matter how much you debate about whether taxes are fair, the government wants its money and it will get it by any means. Missing on tax payments intentionally can be quite an expensive affair. From fines and penalties to legal fees, you may have to shell out a fortune just to straighten everything out.
5. Get insured
You’ll need insurance for your car, home, health, and so on. We live in a highly litigious society these days. If someone gets hurt in your home or by your car, you may find yourself facing a lawsuit. Being insured will help you to offset the costs.
Life insurance is another key thing you need to focus on if you have a family with dependents. The same applies to health insurance that seems like a monumental waste of money until you need it. Never underestimate how important insurance is.
6. Negotiate where possible
Negotiation can be applied to any type of expense – renting a place or buying a home or purchasing a car or make any financial decision. If you can negotiate, always ask for a lower price. If you don’t ask, you won’t get it. You would be amazed by how much you can save just by asking.
When buying online, look for deals that can help you save a lot of money. Also, wait for yearly discounts for all your major purchases.
7. Write down your expenses
For at least one month, write down all your expenses daily down to the last cent. This will give you an idea of just where your money is going. It’s a fantastic exercise for developing self-awareness of your spending habits.
Knowing how you spend and where the chunk of your money goes will not only help you to balance your budget better, but you will be able to trim away unnecessary expenses.
Get a copy of our weekly and monthly budget planners to bring structure to your expense list.
8. Save a portion of all you earn
No list would be complete without mentioning that you should save FIRST, before spending. Some say it is better to save at least 30%, while other experts differ on this. However, this is best left to your consideration.
The amount you save is not as important as the habit itself. You want to inculcate the habit of saving. Over time, you’ll have a sum of money that you know you can always fall back on. This will help you with your financial hygiene and take control of your finances.
Just this knowledge alone will give you more confidence and elevate you from a position of financial desperation to one where you’re relatively safe. This mindset shift will allow you to focus on earning more and increasing your net worth.
Apply the tips above and be money-smart in a debt-filled world.