Top 3 Personal Finance Tips
I was pretty spent (pun intended) after recently completing about 45 hours of personal finance instructor training and taking (and passing, woo hoo) an instructor certification test. I wanted to share these tips NOT because I’m an expert by any means, but because I realized that personal finance is really about awareness, choices, and our behavior. Did you know that according to Next Generation Personal Finance a person who uses the knowledge from a personal finance class is more likely to save about $3,000 per year. And when compounded at 7%, that could add up to roughly $600,000 over their lifetime. It really pays off to learn about and practice good personal finance habits, especially at a young age. Here are just three of my top take aways:
Wake up
And I mean this in the most kind, empathetic way. This can be a teenager realizing that they want to start saving to buy a car, a 20 year old trying to rent their first apartment and being told that they have no credit history, or a 52 year old with credit card debt wondering what to do to get out of it. We all have our moments of revelation where we realize that we’re not where we want to be and need to pivot. It can be exciting and overwhelming at the same time. I’m learning to just plan to pivot.
The good thing that this is the most important and first step because now you can start working on creating a map to get where you want to go. I suppose it’s sort of two steps in one - wake up and then stay awake. Which brings me to the next step.
Identify your values
Realizing what’s most important to you is key to making a solid financial plan. Do you love going out to eat or buying your best friend a birthday gift or dream of taking your family on a trip? Your values indicate where you spend your money. Take the time to explore your own values. This is a good time to think about how you learned about money and where you get information about money.
Something else to think about are cognitive biases and how how you will deal with them as they come up. Some examples are herd mentality, fear of financial loss, and over confidence to name a few. Consider how the fear of missing out and social media impacts your spending habits. Our financial goals will shift over time, but our values are usually steady and guide our behavior and habits.
Pay yourself first
According to Nerdwallet, most Americans tend to save but don’t have enough to cover a $1,000 emergency. Looking across the age ranges, 95% of Millennials set money aside while only 86% of Baby Boomers save. A huge benefit to paying yourself first (aka putting a set amount of each deposit into your savings), is that you are building a nest egg for yourself. Some people apply the 75-15-10 method of budgeting, which translates to automatically saving 10% of any income check or gift money, investing 15%, and then spending 75% on your needs and wants. Paying yourself first, whatever you can afford, is a crucial habit to adopt so that your money can grow (aka compound).
If you are curious about flexing your personal finance muscles and growing your skill set, check out some of these resources:
The Psychology of Money: Timeless lessons on wealth, greed, and happiness by Morgan Housel
Financial Intelligence: How to make smart, values-based decisions with your money and your life by Doug Lennick, CFP
Nerdwallet - they have advertisements but good content
Investopedia - explore all things investing, saving, and financial growth
Next Generation Personal Finance (NGPF) Podcasts - listen to topics ranging from industry experts to personal stories and what people have learned along the way. NGPF also has free educational material
Bigger Pockets Podcast - listen to two industry experts share relevant and approachable actions you can take to grow your money
