Personal Finance Services, Personal Finance Meaning, Personal Finance Tools & Services

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Personal Finance Services, Personal Finance Meaning, Personal Finance Tools & Services


Personal Finance Services, Personal Finance Meaning, Personal Finance Tools & Services


Personal Finance Strategies

The sooner you start financial planning, the better, but it’s never too late to create financial goals to give yourself and your family financial security and freedom. Here are the best practices and tips for personal finance.

 
 

The 2022 Investopedia Financial Literacy Survey surveyed 4,000 adults and found that most Americans are concerned about personal finance basics, retirement funding, and investing in crypto.

1. Know Your income

It's all for nothing if you don't know how much you bring home after taxes and withholding. So before deciding anything, ensure you know exactly how much take-home pay you receive.

 

2. Devise a Budget

A budget is essential to living within your means and saving enough to meet your long-term goals. The 50/30/20 budgeting method offers a great framework. It breaks down like this:

 
  • Fifty percent of your take-home pay or net income (after taxes) goes toward living essentials, such as rent, utilities, groceries, and transport.
  • Thirty percent is allocated to discretionary expenses, such as dining out and shopping for clothes. Giving to charity can go here as well.
  • Twenty percent goes toward the future—paying down debt and saving for retirement and emergencies.
 

It’s never been easier to manage money, thanks to a growing number of smartphone personal budgeting apps that put day-to-day finances in the palm of your hand. Here are just two examples:

 
  • YNAB (an acronym for You Need a Budget) helps you track and adjust your spending to control every dollar you spend.2
  • Mint streamlines cash flow, budgets, credit cards, bills, and investment tracking from one place. It automatically updates and categorizes your financial data as information comes in, so you always know where you stand financially. The app will even dish out custom tips and advice.3
 

3. Pay Yourself First

It’s important to “pay yourself first” to ensure money is set aside for unexpected expenses, such as medical bills, a significant car repair, day-to-day expenses if you get laid off, and more. The ideal safety net is three to 12 months of living expenses.

 

Financial experts generally recommend putting away 20% of each paycheck every month. Once you’ve filled up your emergency fund, don’t stop. Continue funneling the monthly 20% toward other financial goals, such as a retirement fund or a down payment on a home.

 

4. Limit and Reduce Debt

It sounds simple enough: Don't spend more than you earn to keep debt from getting out of hand. But, of course, most people have to borrow from time to time, and sometimes going into debt can be advantageous—for example, if it leads to acquiring an asset. Taking out a mortgage to buy a house might be one such case. Still, leasing sometimes can be more economical than buying outright, whether renting a property, leasing a car, or even getting a subscription to computer software.

 

On the other hand, minimizing repayments (to interest only, for instance) can free up income to invest elsewhere or put into retirement savings while you’re young when your nest egg gets the maximum benefit from compounding interest. Some private and federal loans are even eligible for a rate reduction if the borrower enrolls in auto pay.45

 

Student loans account for $1.59 trillion of consumer debt—if you have an outstanding student loan, you should prioritize it. There are myriad loan repayment plans and payment reduction strategies available. If you’re stuck with a high interest rate, paying off the principal faster can make sense.

 

Flexible federal repayment programs worth checking out include:

 

  • Graduated repayment—progressively increases the monthly payment over 10 years
  • Extended repayment—stretches out the loan over a period that can be as long as 25 years
  • Income-driven repayment—limits payments to 10% to 15% of your income (based on your income and family size)

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