Personal Finance for Dummies: 10 Things You Should Know

July 1, 2021 | Daniel Dewitt

personal finance for dummies

Having money troubles? You need to take a look at our personal finance for dummies guide. Luckily, we have all the information right here.

We'll explore budgeting, saving, insurance, protecting, and even credit scores. Plus, we'll even give you a way to get your hands on cash quickly when you need it most.

Personal Finance for Dummies Guide

Without further ado, let's discuss personal finance for dummies, the 10 things you should know.

1. Save 20% of Your Income

That's right. You should be saving 20% of your monthly income. Whether you're saving for emergencies, retirement, or repaying your mortgage, it's a good idea to stock up your money for significant life events.

The earlier you start, the easier it is to keep going. Not to mention the likelihood of you having enough to tide you over is significantly higher!

2. Use 30% of Your Income for Leisure

You've heard the saying "work hard, play hard", right? Well, that's what we're talking about here. You deserve to use your hard-earned dollars for leisure activities like:

  • Eating out
  • Going to the cinema
  • Swimming
  • Heading to the club

Doing fun things doesn't mean you let your money fly out the window. Instead, you dedicate 30% of it to this part of your life. Enjoyment and being financially responsible can go hand-in-hand if you let them.

3. Look at Your Spending Every Single Day

Granted, this may well seem like a chore. But you should set aside some time to check your financial environment every day. Whether you use a swish new app or a traditional notebook to track your progress, it's vital to keep on top of your money. It allows you to identify problems quickly, preventing catastrophic consequences.

4. Make a Budget and Stick to It

Every successful person you know will have a budget. Yes. Regardless of whether they make millions or a few thousand bucks a year.

personal finance for dummies: budgeting

You can be as in-depth or as general as you please with your budget. Just make it work for you. It should track your monthly or weekly incoming and outgoing cash.

Once created, find someone to hold you accountable so you stand the best chance of sticking within your budget's constraints.

You're halfway through this personal finance for dummies. By now, you should have a good idea of what you should be doing. But let's continue.

5. Take Out Insurance

Insurance is an essential. You can use it to protect your home, the things inside your home, and your car from damage, accidental fires, other natural disasters, and burglary.

For those who are on a decent salary, investment is key to protecting your wealth from inflation's wrath and conquering personal finance for dummies.

6. High Reward Equals High Risk

Want to keep your short-term savings reachable? You'll sacrifice higher interest/returns. Want to earn money for saving? Try investing. Just remember you face a loss risk.

Ideally, you should keep your short-term savings in a bank account, and your long-term savings in a riskier place.

7. Invest All Over the Place

If you take anything away from this personal finance for dummies talk, let it be this — don't put all your eggs in one basket. You face a large risk of losses if you invest in one stock or put all your money in one sector.

Financial professionals always suggest diversifying your investment portfolios.

8. Don't Fall for Financial Scams

Identity theft affects many of us. It has been a continuous problem for donkey's years. But thankfully, you can reduce the likelihood of being scammed if you monitor your bank account regularly.

Always look at your statements and check for strange changes. If you see a problem, alert your bank as soon as possible. They will then replace your cards and even change your account numbers if needed.

9. Automate Bill and Savings Payments

You'll find it much easier to stay on top of your bills and savings goals if you automate the process. Your salary will come in automatically, and your payments will filter out automatically too. Just set it and forget it.

10. Track Your Credit Score

The dreaded credit score. Unfortunately, it's becoming much more prevalent in our day-to-day lives. Get your free yearly credit report to find errors and make the right moves to increase your score. You'll be approved for better rentals and loan agreements this way.

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