8 Ways to Start Your Personal Finance Journey
When you’re a beginner, personal finance can look daunting, especially when you don’t know where to start. Lots of questions are probably going through your head. How do you even make an effective budget? What kind of financial goals should you list down? Which bank should you trust your money with? And so on.
However, these questions shouldn’t stop you from taking on the journey towards financial success. Get ready to be comfortable with what intimidates you. If you’re a young adult who grew up with the internet in tow, then there’s nothing to really worry about, since there are a lot of online tools, apps, and digital platforms that can help you navigate the world of finance. Once you’ve got these 8 beginner tips down, then you’ll be well on your way to financial stability in no time.
List down your short term and long-term financial goals
If you don’t have a list of financial goals in mind, it might be hard to know how much you want to save and how much you need to budget. Sit down and think of what you want to do in the future. For the short term, do you want to buy something high-priced? Do you want to travel? In the long term, do you want to buy a house when you’re 30? Perhaps you want to retire at 50 years old? It might be hard to know what you actually want when you’re so young but try to reflect on your priorities and take a glimpse into the future you want. Then start writing all of them down.
Having a list makes your goals more concrete and you’ll have something to refer to. Your list can be a great motivator.
Start making and sticking to a budget
Next, create a working budget. Set budgets for different aspects of your finances, from how much your living expenses are to those treats you want to splurge on for yourself. You can make a budget and track your expenses via Google sheets (there are loads of free templates online) or you can take advantage of the good old money management app! Just browse through your mobile phone’s app store and find the budgeting app that’s good for you. Some of these can even sync all your bank accounts and give you reminders for when bills are due. Tracking your cash flows or what goes in and out of your budget can help you reach financial success sooner than you think. Popular money management apps include Mint, Buddy, and YNAB.
Create an emergency fund
Something that everyone absolutely must have, young or old, is an emergency fund. This fund is super important because should an emergency happen (like if you lose your job suddenly, or if your wisdom tooth randomly begins to burst in), you’re financially ready to pay for the costs! This should not be touched if there’s no emergency to use it for. Try placing a small portion of your monthly income into this pocket of savings.
Keep track of your bills and pay them on time
Don’t forget to pay your bills! Paying bills can easily slip away from your thoughts when you’re doing so many things. You don’t want to get a bad rep for this, so make sure you keep track. This is where your budget and money management app come in as well. You can write down all of your monthly bills and then set a date where your phone can remind you via notification. Some digital wallets have this feature too. Don’t make the mistake of being a late payor and always be early or on the dot.
Choose the right bank
In an age where online transactions are becoming more and more prevalent, it’s best to choose a digital bank you can trust. There are lots of great ones in the market, and because their operations are all online, they can actually afford to give sky high interest rates that traditional banks can’t. While it’s good to put your money in a mix of banks, try putting a sizable portion of your savings in a product that offers significant interest rates. Digital banks offer up to 6% interest rates on their time deposits – something that’s unheard of in the traditional banking sphere.
Save right with a savings account
Now that we’re on the topic of digital banks, we suggest that it’s best to put your savings there, and perhaps your liquid cash in more popular traditional banks. It’s better to save with a digital bank because of, again, their high interest rates that’ll really allow your money to grow! Tracking your personal finance journey is made convenient that way, too. Savings deposits can earn as high as 4.5% on some digital banks.
Got a credit card? Take advantage of card rewards or promos
Credit cards might be hard to get ahold of when you’re young, but if you have one, then congratulations! A great thing about credit cards is that banks and providers have a lot of rewards programs or promos. That way, you can save money by taking those discounts or using collated points instead of your credit. If you don’t have a credit card yet and are planning to get one, try to look at the different types being offered and choose the right one according to your lifestyle—there are cards designed for online shopping, cards meant for travel, and loads more.
Save for your retirement
Retirement is a big and far-off word if you’re still in your teens or early 20s. You’re still young, why do you need to think of retirement already? Because the earlier you start saving up for this, the better! You may even get to retire really early and just enjoy life if you start on this right now! If you’re too scared to try investing at this age, try putting your money into a high-interest time deposit account. It’s not risky and your money will be able to grow while you work your butt off!
If you follow these 8 tips, you’ll be on the road to financial freedom.