Managing our money is one of the hardest things to do. As our income grows, so do our expenses, which is not even considering the economic inflation. The challenges we face daily regarding our finances are a lot; that’s why a little help would go a long way. These trying times highlight the importance of personal finance and different ways to increase our financial IQ.
The pandemic taught us that there is nothing permanent in this world. Our once secure jobs became more unstable as the months under the pandemic continued. Other companies found different coping methods, but a vast majority succumbed to the financial pressure.
Under the immense financial strain put on by the pandemic, how can we then, as individuals, be wiser with our money? Join us as we discuss the concept of personal finance, and let us tackle different ways we can be smart with our money.
Increase Your Financial IQ With These Five Personal Finance Tips
1. Budget Everything
As our income grows, more extravagant lifestyles from lavish influencers will entice us to adapt. The comforts brought on by a larger paycheck may sometimes cause us to live beyond our means. We sometimes take solace in the fact that there’s more to come in the form of the next paycheck.
While rewarding yourself sometimes is good, saving your money for a rainy day is much better. Budgeting is essential because it allows you to set a financial goal for yourself to have a rough estimate of your expenses compared to your income.
Budgeting will also allow you to see how much money you’re going to save a month. A simple task of making a list of your expenses will also make you see different unnecessary expenses you and your family have. Making minor budget cuts from time to time will have a massive effect in the long run if you’re looking to save.
2. Avoid Debt If You Can
The simplest piece of personal finance advice we can give is that if you can’t pay for it without using your credit card, don’t buy it. The quickest way people get in financial trouble is when they get buried in debt.
Credit cards are tempting because you can’t see the amount you’re losing every time you pay. Only when you look at the bill will you realize how much trouble you’re in, which sometimes can already be too late for a recourse.
When in doubt, the right thing to do is just live by your means. That doesn’t mean that you shouldn’t hope for great things like a house or a car, but such things require careful planning. Only consider the option of going for a loan when you’re already financially secure. Even then, going for a loan should be the last resort and not the first option.
3. Follow the 50/30/20 Rule
Budgeting doesn’t mean that you have to deprive yourself of what you want; it’s about creating a balance between your wants and needs. As illustrated above, the 50/30/20 budget rule requires you to allot 50% of your income on your needs, 30% on your wants, and 20% on your savings.
You can even tinker it and allot 30% on savings if you want to save faster, as this is just a suggestion and not a strict rule. The main thing to keep in mind here is to allocate a considerable chunk of your income to your needs.
The only thing you have to factor into this is your willingness to stick to this rule. Letting go of a lot of your wants is a challenge, but allocating the money saved from not going all out on wants to your savings will be beneficial in the long run.
Do you want to ensure a promising future for you and your children? Then start applying this rule and reap the rewards later on.
4. Start a Side Hustle
Side hustles are an excellent way to earn extra income. They don’t take much of your time, and they can put extra money in your pockets. Plus, with the growing popularity of work from home jobs, you can do many of them in your own home.
Here are some of the side hustles you can do:
- ESL (English as a Second Language) Teaching
- Audio to text transcription
- Virtual assistant
There are many more not listed there, and all of them are jobs that pay well. You just have to put forth the extra time and effort to do these things.
Having a side hustle also gives you something to fall back on if something goes wrong with your primary job. Other people would prefer to have two to three side hustles simultaneously instead of just one job.
If you’re looking to make extra income, why not consider starting a side hustle? This approach will undoubtedly bolster your finances and allow you to learn new things from other fields.
5. Invest in Stocks
Stocks are an excellent way to earn passive income. Passive income is a type of income where you let the money do the work for you. Earning passively through stocks is done by buying the stocks of a company that pays dividends.
Once you’re a stockholder of one of these companies, all you have to do is wait for the next payment while you’re still earning income from your job. If it goes well or you need to sell your stocks, you can also go for that option.
Becoming a stockholder is a good option because you are doubling your income, and all you have to do is invest.
If you’re looking for other options to double your income, then try investing in some stocks. That way, you’re earning passive income while earning from your job too.
Personal finance is a tricky matter. You always have to juggle different things simultaneously, and it can get overwhelming at times. But sometimes, the most straightforward methods can get into the right mindset and get our financial life in order.
We hope that these personal finance tips will help ease your financial worries and help you get on track towards financial security. Take these tips to heart, and you’ll find that it’s easy to tackle these problems when you have the proper mindset.