What is personal finance?
Personal finance is a term that involves managing your money, as well as saving and investing. This includes budgeting, banking, insurance, borrowing, investing, retirement planning, and tax and real estate planning. The term often refers to all industries that provide financial services to individuals and households and advise them on financial and investment opportunities.
Personal finance is about achieving personal financial goals, whether they are sufficient for short-term financial needs, retirement planning, or savings in your child’s college education. It all depends on your income, expenses, living needs, as well as your goals and preferences, and plans to meet them within your financial constraints. To maximize income and savings, it is important to have financial literacy so that you can differentiate between good and bad advice and make informed decisions.
Make a budget
A budget is important in your life and is economical enough to achieve your long-term goals. The 50/30/20 budget strategy offers a good framework. It is divided into:
50% of the amount of pride or net income (After taxes, etc.) on living necessities such as rent, equipment, markets, and transportation.
30% is divided into living expenses such as buying food and clothing.
20% in the future, repay the loan, and save for retirement and emergencies
Managing money has never been easier with an increasing number of personal budget apps for smartphones that put your daily finances in the palm of your hand. Here are just two examples: YNAB, also known as Budget Need, helps you track and manage your spending so you can control every dollar you spend. Meanwhile, The Mint improves cash flow, budgets, credit cards, accounts, and investment tracking from one location. It will automatically update and include your financial information when it arrives, so you always know where you are. The app will give you customized tips and recommendations.
Create an emergency fund
It is important to make sure that “Pay yourself first” that the money is set aside for unexpected expenses such as medical expenses, basic car repairs, rent if you do not have a job, etc.
Living costs of three to six months are good security. Generally, financial experts recommend collecting 20% of your salary each month. (Of course, you have a budget!) Once you have filled your “rainy season” fund (for emergencies or sudden unemployment), do not stop adding 20% a month to other financial goals, such a fund jobs. in the back
Personal Debt limitation
It’s simple enough: to avoid getting into debt, do not spend more than you earn. Of course, most people have to borrow from time to time, and sometimes debt can be worthwhile if it leads to a property owner. A home loan is a good example. But sometimes renting can be more economical than buying right away, whether you rent a property, rent a car, or even sign up for computer software.
Use your credit card carefully.
Credit cards can be a huge debt trap. But it is unrealistic not to own any of them in the modern world, and they have other tools to buy, not just important to your credit rating. But it is also a great way to keep track of spending, which can be a big help when budgeting.
The loan must be properly managed, which means the balance must be paid monthly or at least maintained at a minimum rate of loan usage. (That is, keep your account balance below 30% of all available credits) while accepting the special incentive currently offered. (For example, rebates) for purchases should be charged as much as possible. However, it is a good idea to avoid maximizing credit card spending and always pay your bills on time.
Check your credit score
Credit cards are a great way to build and maintain your credit rating, so tracking your credit spending will keep track of your credit score. If you want a lease, mortgage, or another form of financing, you will need a solid credit history behind it. Factors that determine your score include how long you have been in debt, a repayment history, and the debt-to-debt ratio.
The credit score is calculated between 300 and 850. Here is a brief overview:
720 = good credit
650 = average credit
600 or less = bad creditworthy
To pay the charges, set up a direct debit if possible. (So never miss a payment) and subscribe to reporting agencies that regularly update their credit score. By reviewing your reports, you can detect and resolve any errors or fraudulent activity. Federal law allows you to get a free credit report from three major credit bureaus: Equifax, Experian, and TransUnion. You can get reports directly from any agency or you can sign up with Annual Credit Report This is a website sponsored by the Big Three. You can also get free points on websites like Credit Karma, Credit Sesame, or Wallet Hub. Some credit card issuers, such as Capital One, also offer free credit score updates to their customers, for example in combination