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Starting to manage your money is often the most challenging part.
After creating a financial framework, reviewing your finances becomes a regular habit, making it easier to make informed decisions. But “framework” doesn’t simply mean setting up a budget once and leaving it. It’s not about opening a retirement account and expecting to strike it rich.
Your money needs continuous attention. To stay on course, you'll need to frequently review the most critical elements of your financial toolkit.
Creating a Budget
You can’t effectively manage your finances without understanding where your money stands.
There are countless budgeting strategies out there, but if you’re looking for a simple, non-intimidating way to begin, try the Kakeibo method, which divides your spending into just four categories to give you a clear snapshot of what’s working and what needs adjustment.
If starting with a full month feels overwhelming, consider breaking your budget down into biweekly segments instead.
For the ultimate minimalist approach, how about going old-school with a handwritten spending ledger? Tracking your expenses this way for even a month will help you stay on top of your budget every day.
Building Your Savings
Once you’ve got a handle on your budget, it’s time to boost your savings game.
What’s all the talk about emergency funds? Experts recommend having enough saved to cover three to six months of living expenses, in case of job loss or an unexpected expense. However, the ideal amount depends on your individual circumstances. Of course, the more you have saved, the better. But if the thought of saving six months' worth of rent/utilities/food/transportation makes you anxious, remember that any savings will provide you with a financial safety net.
A smart place to store your emergency fund is in a high-yield savings account that earns interest while you enjoy your emergency-free days. Here’s how to choose one.
If your budget has a little more breathing room these days, don’t take that as an excuse to splurge. Whenever you get a raise, be sure to allocate your extra funds to the things that truly matter.
Understanding Banking
When it comes to banking, here’s our top piece of advice: Stop paying fees. Banks are notorious for charging you just to hold your money, to access it, and even for covering you if you accidentally overdraft.
If you’re looking for a reason to switch banks and avoid those pesky fees, here’s plenty of motivation for you:
Happy with your bank? Make sure you’re still staying on top of your finances by setting up alerts and notifications.
And don’t forget: checks are still a thing. Sorry to break it to you, but it’s true. If you don’t use them often and need a refresher on how to write one, we’ve got a guide for you.
Making Use of Credit
Some personal finance experts believe using credit is always a mistake. But we disagree—we see credit as a tool that can help you reach your financial goals. That said, you need to use it wisely.
First things first: You need to understand the magic behind your personal credit score. This guide explains the key components of your score and why it’s crucial to pay on time and keep an eye on your spending:
Ah, the importance of paying on time. To ensure you never miss a due date, let technology work for you by automating your minimum credit card payment.
Ready to start earning points or miles for rewards? We’ve got a beginner’s guide to help you navigate how it all works:
Whether you’re aiming to earn miles or improve your credit score, it’s essential to keep your credit secure. Freezing your credit is a free and simple way to prevent fraud and identity theft.
Getting Started with Investing
With your budget organized, savings in place, and credit under control, it’s time to dive into investing. Forget the image of traders yelling on the floor of the New York Stock Exchange—your experience as a beginner will be much calmer. Your best strategy is to create a simple portfolio that requires minimal upkeep.
There are many other areas of personal finance, such as home buying and paying for college. But for now, focus on the basics—you’ll be amazed at how much they can lay the foundation for your financial success.
