47 Best Personal Finance Tips for Beginners in 2023
Do you feel overwhelmed every time you start thinking about personal finances? I know I was.
Do you see headlines about financial security, financial markets, retirement planning, credit reports, and endless lists of financial products every time you watch the news or look at your phone?
It feels like you are left to sink or swim. But it doesn’t have to be this way.
I started my personal finance journey practically from the very beginning, learning the basics of budgeting, saving money, and figuring out the hard way debt management strategies. I promise you, there is a way to figure it out.
My goal for writing this post is to start you on the path where you will understand the importance of managing your money, setting financial goals, choosing the right financial products, and other concepts.
What is Personal finance?
Personal finance? It’s not just about stashing away a few bucks in a piggy bank or crossing your fingers for a lottery win.
At its core, personal finance is all about making the most of your resources to achieve your financial goals, whether buying your dream home, retiring in style, fixing your credit score, or simply sleeping soundly at night knowing you’ve got a financial safety net.
It’s like having a roadmap for your money, ensuring it’s headed in the right direction instead of getting lost in the financial wilderness.
Why Is Personal Finance Important?
Personal finance is crucial because it affects all aspects of our lives. It’s not just about managing your everyday expenses. It defines all the decisions in your life. Where will you live? Where will your kids go to school?
According to a recent survey, some 70% of Americans admit to being stressed about their personal finances these days and a majority — 52% — of U.S. adults said their financial stress has increased since before the Covid-19 pandemic began in March 2020.
I believe that having the skills to save, budget, and make money will help you decrease stress and build your financial future.
Key Areas of Personal Finance to Master
- Money Mindset
- Finance Essentials
- Budgeting
- Savings
- Debt Management
- Credit Building
- Investing
- Retirement and Financial Planning
- Making Money and Money Management
- Taxes
- Housing and Transportation
- Insurance
- Financial Literacy
Money Mindset
1. Improve Your Relationship with Money
Before we jump into improving your relationship with money, let’s try to understand what it means.
How do you feel about money? What emotions surface when you think about it? What thoughts keep recurring? Do you spend money when you are sad or happy?
Answering these questions will help you understand your money personality and define your money relationship. From there, we can work on creating a positive and healthy money relationship.
2. Set Financial Goals and Regularly Track Your Progress
Setting financial goals is crucial.
Start by assessing your current financial situation. Identify goals you want to achieve. These could be paying off debt, making more money, saving for a home, or retirement.
Use the SMART framework to make sure your goals are specific, measurable, achievable, relevant, and timely. Create a plan, track your progress, and make adjustments if needed to reach your objectives.
You can easily track your progress using different tools, planners, calendars, software, and apps.
3. Design a Financial Vision Board
A financial vision board will help you build a visual representation of your financial goals and aspirations.
Like a traditional vision board, it uses images, words, and symbols to illustrate your financial dreams.
By creating a financial vision board, you can stay motivated, clarify your objectives, and visualize your path to financial success.
It is a powerful tool to help you focus on achieving your long-term financial goals. And let’s not forget that it’s also fun to create.
4. Adopt Money Mantra
A mantra is a phrase you repeat to enhance focus and awareness. Your thoughts hold power, affecting not only your daily life but also your finances.
Whether or not you’re into manifestation, your thoughts have tangible power. They influence your daily path, for better or worse.
Crafting a personal money mantra or affirmation that connects with you can keep you aligned with your goals, including financial ones.
5. Practice Delayed Gratification for Major Purchases
What’s that? It’s all about waiting a bit before you make those major purchases.
Instead of diving in headfirst, take some time to think it over. Ask yourself if you need it or if it’s just a spur-of-the-moment craving.
By waiting, you give yourself a chance to weigh the pros and cons, save up for it if needed, and see if it’s a smart move for your wallet. Plus, when you finally get that big-ticket item, it feels great because you’ve been patient and thoughtful about it.
So, practice a little patience, and your bank account will thank you!
6. Cultivate a Frugal Mindset Without Depriving Yourself
You can be smart with your money without missing out on life’s pleasures. It’s all about cultivating a frugal mindset.
What’s that, you ask? Well, it means being mindful of spending and making savvy choices without depriving yourself of fun stuff.
I think of it as a balance – you cut back on unnecessary expenses but still treat yourself to things you enjoy. It’s like having your cake and eating it too (well, within reason, of course).
By doing this, you save money, reduce financial stress, and have more cash for the things that matter to you.
Finance Essentials
7. Get Familiar with Basic Finance Terms
Getting to know basic finance terms is like learning the ABCs of money.
It means understanding words like ‘budget,’ ‘interest rate,’ and ‘investment.’ Learning concepts like ‘assets”, ‘liabilities’ and ‘net worth’ will serve you for the rest of your financial journey.
It’s not as complicated as it might seem. It’s a crucial step toward making better financial decisions.
8. Use Financial Tools and Calculators
Have you ever used a pen and paper to figure out your budget? These days are long for me.
Ever since I started using financial tools and calculators my life has changed.
These are like your trusted helpers in the money world. They can help you design a budget, figure out your savings, calculate your net worth, what your loan payments should be, or even how to grow your investments.
Think of them as your financial sidekicks. The math is done for you so you can make decisions about money with confidence.
Budgeting
10. Create a Monthly Budget
A budget helps you prepare for expenses ahead of time instead of hoping you’ll have enough cash when you need it.
Plus, budgets make you aware of your spending habits. This way, you can focus on what truly matters to you and cut back on things that don’t.
It may be a daunting task at the beginning, but knowing how to distribute monthly income is fundamental in your financial planning.
12. Use Budgeting Apps to Track Your Spending
I am not going to lie. Designing a sustainable budget will take some time. But with all the resources and tools like worksheets, software, and apps, you will be able to figure it out.
Tracking your spending will be essential.
13. Use Envelopes for Discretionary Spending
Have you ever tried using an envelope method to help you budget?
It’s like giving each spending category its own little home. You put a set amount of cash in each envelope, say one for dining out and another for entertainment.
This way, you can see how much you have left for fun stuff. It’s like having a spending plan that’s super clear and hands-on.
When the envelope is empty, you know it’s time to hold off until next month.
Savings
14. Set up an Emergency Fund
Creating an emergency fund means putting aside money for unexpected expenses, like car repairs, a new fridge, or medical bills.
It provides financial security, so you’re prepared for life’s surprises and can avoid unnecessary stress.
The recommended amount is three to six months of your monthly expenses.
15. Keep Your Savings Out of Your Checking Account
Keep your savings in a separate bank account from your checking account. It’s like giving your savings its own cozy home.
This helps prevent accidental spending and makes it easier to track and grow your savings. It will be clear when you save for what you intended.
My favorite trick is to open an account and name it what my saving goal is. For example: “My Thailand trip in 2024″…etc
16. Research Savings Accounts With the Best Interest Rates
Check and compare various accounts online, ask your bank about special promotions, or check out credit unions for better rates.
This can help your money grow faster over time and make the most of your savings.
17. Start Saving For a House
Saving money to buy a house is a significant goal. It can lead you to homeownership, providing you with a place to call your own.
Start by discovering how much you can afford, then determine how much you need for a down payment. Open a savings account and make it a habit to put money away weekly, bi-weekly, or monthly.
Leverage technology to help you stay on track and find extra dollars in your monthly budget.
Debt Management
18. Create a Plan to Pay Off Your Debt
This involves setting clear goals, budgeting, and allocating extra funds to pay off your debt faster. It’s a practical step towards becoming debt-free and achieving financial stability.
There are different strategies such as the snowball method or an avalanche method. Research both and see what will work for you better.
19. Consider Consolidating or Refinancing Your Loans
Consolidating or refinancing your loans means combining your loans or getting a new loan with better terms to save money and simplify your loan management.
It can lower your monthly payments, reduce interest rates, and potentially save you thousands of dollars over the life of your loans.
It’s a smart step to optimize your financial situation and get closer to financial freedom.
21. Pay More Than The Minimum on Credit Card Bills
Paying more than the minimum on your credit card bills is a wise move.
It helps you reduce your debt faster and save on interest charges. It’s all about making progress toward becoming debt-free and saving money in the long run.
You can use a credit card repayment calculator to see the impact of paying a little more each month. You will be amazed!
23. Prioritize Student Loan Repayment Strategies
This means finding practical ways to manage and pay off your student loans faster.
Exploring income-driven repayment plans, loan consolidation, or refinancing is one option. Another option is to make additional payments to your principal or change payment frequency.
It’s about taking control of your financial future.
Credit Building
24. Get Familiar With What Affects Your Credit Score
Knowing your credit score and what affects it is very important. It can impact your financial life in various ways. For example: when applying for a loan or a credit card, or even when renting a place or applying for a job.
Take the time to learn what influences your credit score. Things like paying bills on time, keeping your credit card balances low, and not opening too many new accounts all play a role.
When you know the game, you can make smart moves to keep your credit score in good shape and open up more opportunities.
25. Review and Monitor Your Credit Report
Your credit report holds all the information about your borrowing history and helps determine your credit score.
It’s a bit like giving your financial well-being a checkup. And when you have a healthy credit report, it’s easier to qualify for loans or better interest rates.
You can spot any errors or signs of identity theft by regularly checking your report. Many companies offer credit reviews.
26. Employ Credit Repair Strategies if Needed
You can start by addressing errors on your credit report, creating a plan to pay off overdue bills, reducing credit card balances, and limiting new credit applications.
It’s a bit like cleaning up your financials.
So, don’t be discouraged. Be patient and persistent in your efforts and over time, you should see positive changes.
There are many services to help you build credit. Some include counseling, credit repair services, and apps.
Investing
27. Understand the Different Types of Investment Vehicles
Knowing the different investment vehicles such as stocks, bonds, and mutual funds, you can decide how to grow your money. Whether you’re up for the excitement of stocks or the stability of bonds.
Think of stocks as owning a piece of a company. You become a shareholder when you buy a stock.
It’s like joining a team and sharing in its victories and losses.
Now, bonds are more like loans you give to a company or the government. They promise to pay you back with interest over time.
It’s like being the lender and earning interest on your generosity.
28. Consider Exchange Traded Funds and Mutual Funds
Thinking about exchange-traded funds (ETFs) and mutual funds gives you various investment options.
ETFs: These are like baskets of different investments, making it easy to diversify your portfolio.
Mutual Funds: These involve a group of investors pooling their money to invest collectively.
Both ETFs and mutual funds offer diversification and professional management. Both are solid choices for investors looking to grow their money. However, additional consideration should be given to fees.
29. Don’t Try to Time the Market; Focus on Long-term Strategy
Trying to time the stock market is like catching lightning in a bottle. It’s really tough!
Instead, I think about investing as a long journey.
Long-term Strategy means having a plan and sticking to it over time. You’re not trying to guess when to buy or sell. You’re looking at the big picture.
You are less stressed about the market’s ups and downs by focusing on the long term. And your investments have the chance to grow and weather storms.
Retirement and Financial Planning
31. Estimate Your Retirement Needs to Set Long-Term Goals
Estimating your retirement needs means figuring out how much money you’ll need for a comfortable retirement.
My favorite part was figuring out the Financial Independence Number. It’s the savings goal for your retirement.
Going through this process makes you think about things you would like to do when you retire and not just focus on numbers.
32. Get Familiar with Retirement Accounts
These are special types of accounts that offer tax advantages for retirement savings like 401(k)s and IRAs.
By understanding these accounts, you can choose the best one for your needs and start saving for retirement.
I would take time to research these accounts and make sure I choose the correct account type for my needs.
Making Money and Money Management
34. Continuously Develop Your Skills for Career Growth
Investing in your skills and knowledge is crucial for advancing in your career.
Consider taking courses, attending workshops, or seeking opportunities to learn and grow within your field.
This ongoing development enhances your expertise and increases your chances of securing better job positions and career progression.
35. Explore Side Hustles or Freelance Opportunities
Exploring side jobs or freelance work can provide extra income and financial security.
You can leverage your skills and talents to take on freelance projects, offer services, or even start a small business on the side.
These opportunities supplement your main income and allow you to pursue your passions while boosting your finances.
36. Start a Business
Entrepreneurship can be very rewarding.
Launching a business allows you to turn your ideas or passions into income-generating ventures.
While it requires careful planning and hard work, it can provide financial stability and personal fulfillment.
I love the freedom it gives you to build a financial future on your terms.
37. Get to Know Banking Services Available to You
Understanding your banking options is essential for effective money management.
Take the time to research the various banking services your financial institution offers.
This knowledge empowers you to select the checking accounts, loans, and debit/ credit cards that align with your financial goals.
It helps you save on fees and optimize your finances.
38. Consider Using a professional
Sometimes, seeking advice from a financial expert is a wise move.
Financial professionals have the expertise to guide you through complex financial decisions.
A financial advisor or certified financial planner can have insights that will make you well-informed decisions. They can assist with developing an investment strategy, planning for retirement, or managing debt.
You cannot be an expert in everything. Believe me, I tried!
Taxes
39. Understand Taxable income
Taxable income refers to the money you earn, which the government can subject to taxation.
This income includes your salary, wages, bonuses, and certain types of investment income.
Understanding what constitutes taxable income helps you calculate your tax liability accurately and ensures compliance with tax laws.
I found it very helpful to know what kind of credits and deductions are available to allow me to reduce my taxable income.
You can always use tax software or an accountant if you need assistance.
40. Contribute to Tax-advantaged Accounts
Tax-advantaged accounts, such as Individual Retirement Accounts (IRAs) and 401(k)s, come with tax benefits.
When you contribute to these accounts, you can often reduce your taxable income for the year.
This means you may pay less in taxes while saving for retirement.
It’s a tax-efficient way to secure your financial future.
41. Consider Tax Implications When Making Investment Decisions
Making informed investment decisions involves assessing the potential tax consequences of your choices.
Different investments have varying tax rules, impacting your taxable income and capital gains.
By accounting for tax implications, you can optimize your investment strategy to minimize tax liability and maximize returns.
Housing and Transportation
42. Choose Housing That Aligns With Your Budget and Needs
When selecting a home, consider your budget and lifestyle.
Calculate what you can comfortably afford, including mortgage payments, maintenance costs, and other expenses.
Additionally, think about your specific needs, such as the size of the property and its location.
This approach will help you find a home that not only fits your finances but also meets your living requirements.
44. Get Creative to Cut Down Commuting Costs
To reduce commuting expenses, explore cost-effective alternatives. Consider carpooling with coworkers, using public transportation, ride-sharing services, or even biking to work if feasible.
Every dollar saved on your daily commute can accumulate into substantial savings over time, providing more flexibility for your other financial goals.
Insurance
45. Research Different Types of Insurance Products
Exploring various insurance products is essential to make sure that you and your loved ones are protected. Here are some important types to consider:
Life Insurance: Provides financial support to your family if something happens to you.
Homeowners Insurance: Covers property damage and losses, like those caused by fire or theft.
Auto Insurance: Offers financial protection in case of car accidents, covering repairs and medical expenses.
Disability Insurance: Provides income if you’re unable to work due to illness or injury.
Annuities: Offer a steady income stream, often used in retirement planning.
By researching and understanding these insurance products, you’re building a financial safety net to protect your well-being.”
46. Review Your Insurance Coverage Regularly
As a general rule of thumb, aim for an annual check-up.
But when big life changes happen, don’t wait for the annual schedule – review your policies immediately.
Staying proactive ensures that your insurance always reflects your current needs and situation, giving you the peace of mind and financial security you deserve.
Financial Literacy
47. Educate Yourself about Personal Finances
Begin with the fundamentals. Learn about budgeting (tracking your money), saving (setting money aside), and investing (making your money work for you).
The Internet is a valuable resource for personal finance education. There are many websites, videos, podcasts, and articles explaining these concepts clearly. You can also find books written by experts in the field.
You don’t need to become a financial expert overnight. I most certainly did not!
I took it one step at a time, absorbed information gradually, and applied what I learned in practice.
Over time, you’ll become more confident in managing your finances effectively.
How Can Personal Finance Tips Benefit You?
Are you looking to improve your financial situation? Personal finance tips can be a valuable resource.
Here’s how personal finance tips can benefit you:
Financial Confidence: Gain knowledge and strategies to feel more confident in managing your money.
Effective Saving: Learn practical methods to save money without compromising your lifestyle.
Debt Management: Get advice on how to tackle and eliminate debt faster.
Investment Insights: Discover opportunities for potential financial growth through investing.
Financial Security: Develop the skills to prepare for unexpected challenges.
To benefit from personal finance tips, implement these gradually into your financial routine, starting as soon as possible.
Conclusion
In conclusion, there are many ways to approach your financial development and enhance your financial well-being.
I’m here to share these personal finance insights to empower you with the tools and know-how to take charge of your finances and work toward your financial aspirations.
If you follow these personal finance tips, you will be able to:
- Apply these insights and become more financially savvy and self-assured in managing your money.
- Uncover practical techniques to save money without compromising your lifestyle.
- Gain expert guidance on how to tackle and eliminate debt.
- Explore ways for potential financial growth through informed investing to help you build wealth over time.
Frequently Asked Questions
What are the 5 basics of personal finance?
The five basic areas of personal finance are income, spending, savings, investing, and protection.
Income is the money you earn, whether it’s from your job, a side hustle, or any other source.
Spending is how you use your money, like paying bills, buying groceries, or treating yourself to a movie night.
Saving means putting some of your money aside for future needs or goals. It’s like building a safety net for rainy days or exciting adventures.
Investing involves using your money to make more money, like buying stocks or real estate.
Protection is all about safeguarding your financial well-being with things like insurance.
What is the 50-30-20 rule?
The 50-30-20 rule tells you to put 50% of your money toward needs (housing, food, bills), 30% toward wants (entertainment, travel), and 20% toward savings (emergency fund, retirement) and other obligations (credit card payments, car loan).
