Personal Finance Planning
5 Word Golden Rule in Personal Finance Planning
Most of us are familiar with the biblical golden rule, but did you know there is also a golden rule in personal finance? This one is so simple that it defies human logic. So many people have a hard time understanding, or maybe they don’t want to. But common sense gives us this golden rule.
Are you ready for it? SPEND LESS THAN YOU MAKE. Wow! This is good advice for anyone to follow who wants to build a strong financial future. It sounds easy to do, but unfortunately, for many, it’s not. Just the mention of the “B” word (budget), causes some people to have a panic attack.
There are three other general rules when it comes to personal finance planning in addition to the golden rule. To begin, you must understand the main difference between wants and needs. If you can’t get past this one, you’ll going to struggle with the rest.
The second rule is to create a basic budget and the third is to not take on any unnecessary debt. It’s really that simple…plus, get into the habit of paying yourself first to begin saving money. Try to avoid peer pressure and/or temptation when you’re shopping and make purchases only after you have weighed your options. Other personal finance planning rules include budgeting and living below your means when possible.
Budgeting
While budgeting may seem confusing and complicated, it’s actually relatively simple. The hardest thing for many individuals is starting. It helps to start by examining your budget and your lifestyle. By making small changes, you can save significant amounts of money. For instance, you can buy groceries on sale, make your own lunch, or drive a more fuel-efficient car.
You can also consider switching to a high-deductible health plan to reduce health care costs and get a tax break too. These are only a few examples of simple ways to cut back on your expenses and increase your financial security.
Budgeting Rule of Thumb
Another popular budgeting method that works is the 50/30/20 rule, which allocates 50 percent of your net income toward needs and 30 percent to wants. The 20 per cent is for savings and additional debt retirement. Using this budgeting strategy helps you set priorities for spending and save for important goals.
Besides ensuring you save for the future, the 50/30/20 rule also helps you stay within your budget by controlling your spending habits and avoiding making poor financial choices.
Stop Spending on Things You Don’t Need
You’ve been told to save money your whole life, and now you’re finally doing it. Congrats! Your first few steps should be to cut back on your expenses. Why? Because as soon as you start saving money, you’ll have more money in your bank account. This is personal finance planning the way it should be.
And more money means more freedom to choose the life you want. Stop spending on things you don’t need. This may sound like common sense, but it’s surprising how many people spend money on things that don’t matter.
For example, take a close look at your monthly expenses and see if any big-ticket items pop out. Do your cell phone bill and cable bill really matter to you? Is your car really that necessary? These are all questions you need to ask yourself before you make a decision on how much to spend.
This rule is one of the most important for personal finance planning. It involves saving and spending less money than you make. Living below your means will help you deal with unexpected expenses, fund your dreams, and save for your retirement. You can start by creating a realistic budget and then start making small changes to save for the future.
Investing in yourself
Investing in yourself is a great way to invest your money. Besides stocks and bonds, you should invest in your interests, career, and health. You can even invest in inspirational wallpapers to keep you motivated. If you’re unsure of what to invest in, you can read these tips to get started.
Avoiding credit card debt
Credit card debt is one of the most common forms of personal debt, and also one of the most expensive. The average household owes about $7,089 on their credit cards for the 2022 year. A credit card works like a revolving line of credit.
You buy things with it, but you’re also responsible for paying it back. While credit cards are useful for building a good credit history, they can also cause you to accumulate too much debt. Some people have a hard time passing up their wants by using credit cards.
And now, with the USA in recession, (or at the edge of the cliff), many have to rely on credit cards to cover their needs. Inflation is at its highest point in four decades, and wages haven’t been rising, thereby forcing more credit card use.
Developing solid personal finance planning and avoiding foolish whims are vital if you want to avoid credit card debt. According to the latest figures from Equifax, the most important consideration now in personal finance planning is to avoid credit card debt. By following a budget, you can reduce your expenditures and pay off your balances.
Stop Using Credit Unless It’s for an emergency
This is one that gets overlooked a lot. Credit cards are designed to help you get out of a jam, but they’re one of the main ways that most people get into trouble. Credit cards should be used as a last resort – when all other options have been exhausted.
Never keep a balance on a credit card that you don’t have to. You’re probably thinking that this is something that only applies to the rich, but the truth is that everyone has a few credit cards buried in their wallet. Most people don’t even notice them. That’s because they don’t use them.
Contribute To Your Retirement Account
If you have any savings accounts, make sure that they’re contributing to your retirement account. You should be putting money into your 401k, Roth IRA, and other retirement accounts as soon as possible. If you wait too long, the government will take it away from you through taxes. This is an important item in your personal finance planning budget.
If you want to get the most out of your retirement account, you should be contributing at least 10% of your income. This may sound like common sense, but the truth is that many people don’t contribute enough to their retirement account. If you want to get the most out of your retirement account, you should be contributing at least 10% of your income.
Set A Goal and Track Progress
This is something that a lot of financial experts do, and it’s a great way to stay motivated. Setting an immediate goal is one of the best ways to get your finances on track. For example, if your immediate goal is to get a new car or pay off your credit card debt, you’ll be more motivated to take action.
You can also track your progress toward your goals. This is a great way to stay motivated and see results in your finances. It’s also a great way to stay on track with your budget. You can keep track of your spending and compare it to your budget. This will help you stay on track with your finances.
Set Up a Strict Spending Plan
This is another one that gets overlooked a lot. You need to create a realistic budget to help you stay focused on saving your money. For example, you can make a detailed spreadsheet where you track your expenses.
You can also create a budget plan with a low-cost software program that tracks your income and how much money you’re spending on all items in your budget. If you want to get the most out of your personal finance planning, you need to be strict about sticking to it.
This may sound like common sense, but the truth is that a lot of people don’t use a budget or track their expenses. A budget is a great way to stay focused on saving your money and will help you stay on track with your finances.
Make The Most of What You Have
This is something that a lot of financial experts don’t like to discuss, but it’s an essential part of the process. For example, you can use your credit card only when it’s an emergency.
And you should only use it if you have an immediate expense like a medical bill. You can also use your credit card only as long as it doesn’t go over a certain amount. This is a rule that a lot of financial experts don’t like to talk about, but it will help you get the most out of your credit card usage.
Conclusion
There are a lot of great things that you can do to save money, but the most important thing to remember is to spend less than you make. This is especially important if you’re trying to build a large amount of savings. Make sure that your take home pay covers the bills that you need to pay and that you don’t have to go deep into debt to make ends meet. This is what personal finance planning is all about.
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