Simple Personal Finance Rules of Thumb
The following is a guest post by blogger, economist and fan of this site Kostas Chiotis.
Dealing with your finances can be very tricky. This is particularly true if you have many demands for your hard-earned income. I suspect most people do.
Once some financial problems begin they can quickly spiral out of control, there are real reasons many people are in major debt and can’t dig out of it.
Effective money management is not just about watching where all your money goes, or just staying out of debt. You need to protect yourself and educate yourself about various financial products and accounts, amongst many other things.
My simple strategies and tips to help
When it comes to personal finance I believe there are some simple rules of thumb that can apply to many people – what I tell my American counterparts at least. (Mark wrote a similar article for his Canadian friends here – his simple saving and investing rules of thumb.)
Here are my tips to simplify your financial life and ease any financial strain – tips that should put you on a solid financial path sooner than most.
- Spend less than you make: The obvious advice really never goes out of style. It is however surprising just how many people ignore it! You should always ensure your outgoing expenses are not at the same level as your income. If you fail to ignore this golden rule there is no buffer to cover unexpected costs such as household repairs or medical costs.
- Educate yourself: Another obvious truth but it’s critical to educate yourself so you develop a better understanding how to manage your finance. This means you need to make some financial literacy investments in you. You will find many personal finance books on Mark’s site and I’ve got dozens listed by many financial experts on my site as well.
- Protect yourself: Mark recently wrote about this theme on his site – with the Equifax breach and what you can do about it. More and more, protecting yourself against issues that could cause financial problems is becoming increasingly more important. In short, if you cannot afford to lose it then you need to protect it. I recommend you always disaster-proof your life.
- Simplify your portfolio: Welcome to the best time to be an investor. You can now tap into various resources to make managing your investments easier. The more simplified your portfolio is, the more likely you’ll stick with it. These days, you can gain access to a wide range of personal finance apps and software to manage a portfolio. Of course, everyone has different ways of budgeting so find a simple budgeting approach that suits you.
- Reduce high interest debt: Many people are unfortunately accruing high interest debt these days. This comes in the form of credit card debt, high interest loan repayments, among others. If this is you, realize by only paying the minimum debt repayment every month, you’ll never get ahead. You will waste potentially hundreds if not thousands of dollars making just interest payments. Consolidation of your high interest debt into one (lower) loan payment is one way to reduce to your financial burden.
- Get advice if you need it: If you are drowning in debt and cannot see a way out, it is important to seek advice from experts. Consider reaching out to a government agency – including these contributors in Canada. This helps ensure you get valuable advice and services free of charge.
Regardless if you live in the U.S. or Canada or elsewhere, whatever your financial situation is, there are always ways to improve your money management ways.
With more and more households experiencing debt issues and personal finance problems, the range of resources available to help has widened – considerably. Whether you need tools to help you budget, tactics to manage your debt, solutions to increase income, or government services for financial assistance, you should have no problem accessing them.
I wish you well in your financial journey and encourage you to tap into the various resources above to improve your financial future.