Start Your Financial Literacy Journey: Personal Finance for Beginners
Anyone can be in control of their personal finances, but you’ve got to start somewhere!
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If you’re thinking about taking control of your money situation and learning how to best manage your personal finances, that’s a great move! When you know a little more about what your finances are and how they can work for you, you’ll feel more confident believing that you can manage them and build wealth. We think that this is possible for anyone to do, no matter what type of financial situation they’re currently in.
But everyone has to learn how to crawl before they can walk, and learning the ins and outs of personal finance are no different. This article is going to start at the beginning and cover topics such as:
- Becoming financially literate (and what that means)
- Ways to begin your own personal finance journey
What is financial literacy (and how do you get it?)
Anyone can become financially literate!
Learning how to manage your money may seem intimidating, but we know that is possible for anyone to do. Some people are scared off by complicated jargon, or concepts that they don’t understand, when in reality, most of the big ideas relating to financial literacy are uncomplicated. Financial literacy is your ability to understand money concepts, such as how to budget your household expenses, understand your personal financial situation, save for future expenses or for big purchases like a home, and even learn to invest and start building wealth.
It’s great to learn about these concepts at an early age, but in truth, you can choose to learn more about your finances and start to build your financial literacy at any age. The first step is getting in the right mindset, that yes, you can do this, and it is definitely worth your time and attention. Thinking that learning about finances is something you can do in the future, or just ignoring it completely, will not help you in the long run.
Without a good financial foundation, you could be missing out on opportunities to achieve dreams like buying a home, building a business and supporting your community, or passing on wealth to your children. You may already be aware that it will benefit you to get financially literate, take control of your financial situation, and learn how to manage your money, but actually going out and doing it is another matter. But everyone has to start somewhere, and no, you don’t need to be an expert in order to start!
Personal finance for beginners
These are basic steps you can take to begin your personal finance journey
So you’re ready to begin managing your personal finances? We have 5 steps you can take now to get on the path towards saving, investing, building wealth, and even paying down debt.
- Create a list of financial goals
This is the first step, and it is one of the best ways to get everything you’re hoping to achieve with your personal finances down on paper. Sometimes it can seem like we know what we want to achieve, we just don’t know how to go about doing it. When you list your financial goals, you can also think about what you’ll need to do to achieve them.
We suggest creating two lists, one for short term goals:
- Starting to pay into your emergency fund
- Limit excessive credit card use or pay it off entirely each month
- Think carefully about impulse buys
- Go to the grocery store with a list
As these goals are something you can work to achieve each month, and really see results.
Then, make a list of long term goals:
- Save for a house (or college education, car, or other large expense)
- Research your retirement options and how you can start saving and investing
These goals will take years to reach, but they are attainable when you have a plan to manage your finances.
- A budget is essential
While not the most fun activity to do, a budget is an honest way to get a true glimpse of what you’re earning and what you’re spending each month. Sometimes we think we know how much is going out of our bank accounts, but when we actually tally numbers, the results may be surprising. All you need is a spreadsheet to list all your earnings such as your salary, and then all your debts, including necessities (rent/mortgage, utilities, groceries, gas, loans) and extras and entertainment (streaming services, dining out, movies, shopping).
It’s a good idea to do this for a few months so you can see where your money is really going and make adjustments. One of the most popular ways to do this is with the 50/30/20 method, where 50% of your income goes to necessities, 30% to other expenses, and 20% to savings.
- Start a savings account
An easy way to set up 20% of your income to come out for savings is with an automatic withdrawal to a savings account. It’s separate from your checking so you won’t spend it, and you won’t miss the money either since it comes out automatically just like another bill. This is a great way to start saving for your emergency account that you can use if you have an unforeseen situation.
- Begin paying down debt + start building wealth
Once you have a handle on your budget and you’re starting to save, you can start concentrating resources towards paying down debt, whether it’s a car loan, credit cards, or student loans. While student loans may be something you have to pay over a longer term, getting rid of high interest credit card debt is a great goal that you can accomplish in the shorter term. Once you’ve paid down some debt, you can either put more of your earnings into your savings for a future house or college education, or start to invest it and build wealth.
- Continue learning
As you start accomplishing your goals, it’s empowering to see debts go down and your savings go up. Once you feel you have a good handle on this, consider learning more about what your money can do for you, or what else might be a good investment decision. There are all kinds of financial books, courses, websites, and podcasts that are great tools to further enhance your financial literacy.
Anyone, including you, can begin to understand your own personal finances and start to feel confident about your level of financial literacy. Try these beginner's steps and who knows how far you’ll go!
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