Did you know that 76 million people in the United States are struggling with their finances? Knowing how many people don’t have control of their finances can be daunting.
If you’re new to financial independence, the last thing you want is to fall into that number. Although finances are intimidating, they’re not impossible to manage.
Keep reading for the ultimate finance for beginners guide.
Table of Contents
Create a Budget
Beginners who are interested in taking the reigns of their finances need to start by creating a budget. Remember, if you’re going to the trouble of creating a budget, you have to stick to it.
The first step in the budgeting process is to figure out your income after taxes. It’s easier to figure out what your income is if you receive a regular paycheck.
However, if you receive income from other sources or have a second job, you might have to figure out your net monthly income.
Once you figure out what your total income is, you can start working on a budget that will allow you to cover all of your basic expenses and leave you room to save for emergencies.
You will have a better chance of sticking to your budget if you track your progress over a few months. Looking at your spending over the course of a few months will help you figure out what is working and what is not.
If your household or your income changes, you should make adjustments to your budget.
Build Your Savings
Looking into your savings is an important step if you plan on taking care of your finances. Having a strong savings account allows you to plan vacations, have the downpayment on a house, and even be financially secure by retirement.
Retirement
When people think of saving for the future, retirement is usually in their mind. Although retirement seems so far away for young people, it’s never too early to start saving for retirement.
The easiest way to start saving for many is to start contributing to their work 401(k). When people take advantage of a 401(k) plan, they’re taking capitalizing on free money their employers are happy to match.
For many, contributing to their 401(k) is not enough to prepare them for retirement. Individuals can also open an IRA account to save up to 20 percent of their salary for retirement.
Emergencies
Beginners know it’s time to take care of their finances when they don’t have a rainy day fund.
If you lose your job, become disabled, or have an unexpected expense, can you count on your emergency fund to get you out of trouble?
Building an emergency fund is necessary for those who want to take charge of their finances.
When you’re ready to build your emergency fund, it’s important to keep your savings in a separate account such as a money market account.
Manage Your Debts
Individuals who have large debts might feel like they need the most help with their personal finances. Although most people wish they can stay out of debt, sometimes it’s inevitable to accrue some debts.
Having some debt like a mortgage or student loans sometimes help is necessary for people to build a future. What people need to realize is they need to be smart about debt.
Not having control of your debts can also take a toll on your credit score and prevent you from getting a low interest on a credit line in the future.
However, if you have poor credit, it is possible to still obtain a credit line. There are some personal loans no credit check options available.
Student Loans
For many college graduates debt is unavoidable. In fact, 70 percent of college students will graduate with a significant amount of debt.
Although those loans aren’t going anywhere, there’s no reason why you can’t manage them.
Many lenders offer repayment plans that make it easy for them to manage their loans. These repayment plans are based on how much you earn.
However, if you can afford to do a higher payment, it’s recommended you do.
Consumer Credit
While credit cards are great to build credit and making large purchases, they can also be a gateway to debt.
The best way to stay clear of credit card debt is by paying your balance in full at the end of the month. If you already have a high balance in your credit cards, you should avoid making purchases you cannot afford to pay.
To manage your credit card debt you should start by identifying the APR of each card, and start paying the card with the highest interest.
The longer it takes you to pay off a credit card the more interest you will pay.
Invest in Insurance
Having insurance should not be overlooked by those who want to take control of their finances. Insurance helps protect individuals from the unexpected.
If an accident were to happen, you know you have insurance in your corner to back you up. There are many types of insurance that can protect your home, health, and even life.
Life Insurance
Life insurance is necessary for a lot of people not only married people with children.
Marital status shouldn’t decide whether or not you get life insurance. In case of your unexpected death, you don’t want to leave your family with a financial burden.
Life insurance can help pay for debts, funeral costs, and other financial obligations. If you’ve been in an accident and had a delayed life insurance claim, you should get in touch with professionals who can help you get your case validated.
Home and Renter’s Insurance
If someone breaks into your home or there is a fire, can you afford to replace your belongings?
For a lot of people, the answer to this question is no. Having homeowners or renters insurance can help you protect your belongings and keep your finances on track.
This insurance typically covers burglary, fire, and even acts of nature.
Finance for Beginners: The Bottom Line
Now that you know the ins and outs of finance for beginners, it’s time you take control of your finances. You can start by setting a budget, managing your debts, and getting insurance.
Did you enjoy these finance tips? We have more where these came from. Check out our finance section.
