10 Personal Finance Hacks to Help You Become Rich
Numerous personal finance tips and tricks can be found when reading a lot of finance books and blogs. This may give the impression that personal finance is a vast, intimidating, and difficult subject, but it isn’t.
The principles of personal finance are so straightforward that I’ve condensed them into just ten brief points. You’ll have more control over your finances and lead a far better financial life if you follow these 10 pieces of advice.
1. Don’t Spend More Than You Make
Yes, I realize that it seems apparent, but still. Given that 78% of Americans who work full-time are living paycheck to paycheck, it must not be the case, according to CNBC.
The problem is that while it’s simple to KNOW that you should be saving more money than you make, it can be much more difficult to DO so.
But you have to spend less than you make if you want to break free from the paycheck-to-paycheck cycle that so many people are in. Among the most important yet fundamental personal finance advice ever is this one.
You must keep tabs on your expenses in order to accomplish this. You can use a free personal finance app or write down your purchases to accomplish this.
2. Acquire Budgetary Skills
Although you might wince a little when you hear the word “budget,” you shouldn’t. Making a budget is simple, and it doesn’t require you to give up on your favorite activities.
To put it simply, budgeting is making a plan for your finances so you can see where they are going each month.
Applying the 50/30/20 rule to your budget is a well-liked and practical method. The way it works is that you set aside 50% of your income for necessities (housing, food, bills, etc.), save 20% of your income, and keep the remaining 30% for yourself.
Although you may need to modify it slightly to fit your lifestyle, this is a nice and simple way to break down your paycheck.
3. Examine Your Revenue and Expenses
This peculiar little tip has the power to alter your financial perspective and improve your budgeting.
It all comes down to calculating daily values for your income and expenses, such as this:
- Your monthly income is $2,500, or about $83 per day.
- Your rent is $800 a month, or about $27 a day.
- Your monthly car insurance premium is $200, or about $7 per day.
- Your monthly expenses for other expenses like gas, groceries, and phone bill total $750, or about $25 per day.
That leaves you with $24 in spending money per day.
Wish to set aside $1,000 for a pleasant trip? You will need to set aside approximately forty-two days’ worth of expenses. That is 42 days without making any purchases.
Do you want to spend $10,000 on a brand-new car? That is approximately 416 days’ worth of expenditure.
This will be beneficial.
4. Put Yourself First
Paying yourself first is an investment in your financial future as well as in future you, which present you will be grateful for.
Why not just give yourself a payment at the end of each month? That sounds like a lot less work.
Paying yourself first works so well because you’re much less likely to spend the money once it’s transferred to a savings account. You might run out of money if you wait until the end of the month to pay yourself!
Without money in the future, you will be very depressed. Invest in yourself to ensure your happiness in the future!
Setting it up to happen automatically is the best way to pay yourself first. If you set up an auto-deposit with WealthSimple, saving money will happen without your having to think about it.
5. Establish Financial Objectives
To reach your financial objectives, you must first determine which objectives are most important to you. Setting and maintaining a specific goal will help you stay motivated and devise a strategy to accelerate your progress.
Now, don’t feel as though you have to aim too high. If you’ve never considered setting personal financial goals before, start small and gradually increase your budget.
I would advise formulating several objectives in each of these categories:
• Your goals for the upcoming three months;
• The upcoming year
• Over the ensuing five years
In this manner, you will have both short- and long-term objectives to strive towards. Your short-term objectives might even serve as minor stepping stones for your longer-term objectives.
Here are a few illustrations of wise financial objectives:
• Purchase a home
• Get into investing
Thus, always remember to set and monitor both short- and long-term goals! Put them in writing and designate a day every month to monitor your advancement.
6. Credit is Not Adequate for Free Money
Although it’s not free money, a credit card is a valuable tool in your financial toolbox.
You are borrowing money from the bank when you make a credit card purchase. The bank will start to charge interest on your balance if you fail to return that money on time.
If you don’t pay off the entire amount each month, this debt may accumulate and grow into a monster.
Nonetheless, utilizing a credit card sensibly and paying off the amount each month is a smart method to begin establishing credit. The majority of credit cards come with extra features like cash back, travel points, or reward points.
Thus, do you think you need a credit card? Well, that depends.
Credit card management and debt avoidance should come easily to you if you can pay the entire amount off each month.
PS: If you plan to use a credit card, use a free tool to periodically check your credit score and report.
As with debit cards, handle credit cards with care. If you must, pay it off in full each day. In order to ensure that I remember, I make an effort to pay off my balance every few weeks. Trim helps me remember when my payments are due as well.
Use a prepaid reloadable card rather than a credit card if you want to go one step further. These cards work just like debit cards, but they have the perks of credit cards.
7. Avoid Taking on Debt
Debt is the equivalent of owing someone money, and gangster movies teach me one thing: you should NEVER owe someone money.
Still, not all debt is created equal.
Let’s define bad debt.
Any debt obtained through the purchase of an item that will depreciate in value and yield no income is referred to as bad debt.
An automobile loan or credit card debt are two instances of bad debt.
What constitutes a good debt?
While I largely agree with those who argue that there is no such thing as good debt, I also acknowledge that, under certain conditions, some debt can be advantageous.
For instance, I would argue that debt is far more advantageous than credit card debt if you plan to take out a loan to buy something that will help you financially in the future. Interest rates on good debt are typically lower as well. Here are some instances:
It can be viewed as good debt because they usually have very low interest rates and attending school can increase your pay as an employee in the future.
But, it’s probably a bad idea to attend college if all you’re doing after high school is figure out what to do. Studying a subject you’re not even interested in could wind up costing you a lot of money. After that, in order to pay off your student loans, you’ll have to work a job you detest. Not enjoyable.
Although it can be difficult to say, mortgages are typically regarded as good debt. You will still have money available for investments and other uses because they are typically low-interest long-term loans. An added benefit of mortgage interest is that it is tax deductible.
Ultimately, you must determine whether buying a home is the right decision for you because home values do not always increase as some may believe. The costs of utilities, home insurance, and property taxes must also be included.
These days, you can start many online businesses for very little money, but in some cases, a small investment can pay big dividends. Because they are used to fund projects that aim to raise your net worth, business loans are regarded as beneficial debt.
8. Maintain an Emergency Fund
Would you have enough money to survive on while searching for a new job if you lost yours tomorrow? If not, you’re not by yourself.
According to this study, even though Americans are saving more money, 57 million, or about 24 percent of the population, lack an emergency fund.
I don’t want to come across as a Debbie downer or a pessimistic Nancy, but emergencies happen all the time. Even though you might not experience them, it’s wise to be ready for anything.
An emergency is something you cannot predict, but you can prepare for it.
Making an emergency fund equal to three to six months’ worth of living expenses is the best way to achieve this. This implies that you could survive on your emergency fund for three to six months while you hunt for a new job if you lost your job tomorrow.
Here are a few typical financial crises:
• Loss of employment
• Vehicle issues;
• Home maintenance;
• Natural disasters;
• Health or dental costs
9. Be Aware of Your Net Worth
Although net worth can appear to be a complex subject, it’s actually very easy. How much money you are worth is your net worth. How much money would you have left over after selling everything you own and paying off all of your debts?
Your net worth is that.
This is how that appears as an equation:
Net worth = Assets (what you own) – Liabilities (what you owe)
Are you prepared to find your net worth? How to do it is as follows:
Make a list of everything you own, or your assets, along with an estimate of their value first. Here are a few illustrations of assets:
Add up the total value of all your assets at the bottom of the list.
Next, make another list of everything you owe, or liabilities. Some instances of liabilities are as follows:
Credit card debt;
Add up the total value of all your liabilities at the bottom of the list.
Once you have the total value of your assets and liabilities, you can calculate your net worth by entering the numbers into the above equation.
It’s good if your net worth is increasing. To further boost your net worth, keep up the good work.
In the event that your net worth is negative, you should review your spending and devise a strategy to improve it. You shouldn’t worry too much if you’re young and have a large student loan because you haven’t even begun working.
To stay current with your net worth, be sure to recalculate it roughly every month.
10. Begin Making Investments
One of the best ways to raise your net worth is through investing, but many people avoid doing so because they are afraid of losing their money. They therefore save their money rather than investing it. That’s excellent, and you should keep some cash set aside for emergencies, but the reality is that savings account money depreciates over time.
You see, the average APY (annual percentage yield) on a savings account is a pitiful 0.06%, while inflation hovers around 1.7%. This implies that the amount of money in your savings account will decrease in purchasing power annually.
What investments can you make, then, to beat inflation? Here are a few choices:
Lending among peers;
Exchange-traded funds (ETFs)
Cryptocurrency (invest at your own risk, as it can be volatile).
Here you have it: ten straightforward points summarizing the fundamentals of personal finance. I have a question for you now: Did these personal finance hints and techniques teach you anything new?
If so, do something about it. Better financial habits should be formed now, not later.
After reading these suggestions, it’s simple to say to yourself, “Oh, I can figure out my net worth tomorrow,” or “Oh, I’ll set up that auto-deposit next month.”
However, if you say things like that, you’re just making up reasons. You’ll be one step closer to financial success if you act now.
Read More : How to Quickly Save Money on a Low Income