When you read a lot of finance books & blogs (as I do), you come across a plethora of personal finance tips and tricks. This can make personal finance seem like a massive, overwhelming, and complicated topic, but it’s really not.

It’s so simple that I’ve broken down the personal finance basics into just 12 quick points. If you live by these 12 pieces of financial advice, you’ll have more control of your money, and you’ll live a rich life.

Keep in mind:

This won’t be easy.

Although there are only 12 tips, if you’re not already doing these things it’s going to take time to build up these new habits. Simply reading these 12 personal finance tips and then closing this page is not going to help you. You need to put in some more effort than that.

If it helps, bookmark this post and read it every day or write these tips down and stick them somewhere you’ll see them.

Spend Less Than You Earn

Yeah, yeah, I know, it sounds obvious, right? Well, it must not be because according to CNBC, 78% of Americans working full-time are living paycheck to paycheck.

Here’s the thing:

It’s easy to KNOW that you should be spending less than you earn, it’s a lot harder to actually do it.

However, if you want to escape the paycheck-to-paycheck lifestyle that so many others live, you need to spend less than you earn. This is one of the most crucial but basic personal finance tips ever.

Learn to Budget

You might hear the word “budget” and cringe a little, but you shouldn’t. Budgeting is not hard, and it doesn’t mean you have to stop doing things you enjoy.

Budgeting is simply creating a plan for your money, so you have a better idea of where it’s going every month.

A popular and effective way to budget is with the 50/30/20 rule. 

How it works is 50% of your income goes towards the necessities (bills, food, housing, etc.), 20% of your income goes towards savings and the remaining 30%you can use for whatever you please.

This is a nice and easy way to break down your paycheck, but you might need to adjust it a bit to fit your lifestyle.

 

Break Down Your Income & Expenses

Credit for this one goes to user GeekLimit on Reddit – one of my favorite personal finance tips!

This is an odd little trick that can change the perspective you have about your money, and help you budget better.

It’s all about breaking your income and expenses down into daily values, like this:

  • You make $2,500/month = ~$83/day.
  • You pay $800/month for rent = ~$27/day.
  • You pay $200/month for car insurance = ~$7/day
  • Everything else (food, phone, gas, etc.) comes to $750/month = ~$25/day

That means you’re left with $24/day in spending money.

Want to save $1,000 for a nice vacation? You’ll have to save about 42 days worth of your spending money. That means 42 days of not spending a dime.

Want to buy a new $10,000 car? That’s about 416 days worth of your spending money.

This will help you see how far purchases are going to set you back and affect your spending ability.

Pay Yourself First

Woman Dropping Coins Into Glass Jar

This personal finance tip is another common one that can have a huge impact on your finances. When you pay yourself first, you’re investing in your financial future; you’re investing in future you, and future you will thank present you for doing so.

So, why not just pay yourself at the end of the month? That’s a lot easier, right?

Well, the reason why paying yourself first works so well is that once that money is sent to a savings account, you’re a lot less likely to spend it. If you wait until the end of the month to pay yourself, you might not have any money left!

Future you will be very sad with no money. Make future you happy by investing in yourself.

Have Financial Goals

If you want to accomplish financial goals, you need to figure out what goals are important to you first. Having a clear goal can keep you motivated and help you come up with a plan to reach that goal even faster.

Now, don’t think that you need to set outrageous goals. If this is your first time thinking about personal financial goals, start off small and work your way up from there. I’d suggest coming up with a few different goals in each of these categories:

  • What you want to achieve in the next 3-months
  • In the next year
  • In the next five years

This way you’ll have some short-term goals to look forward too, and some long-term goals to work towards as well. Your short-term goals may even be small stepping stones towards your bigger goals.

Here are some good financial goals:

  • Save $1,000
  • Buy a house
  • Start investing

So, remember to set long-term and short-term goals, and keep track of them too! Write them down somewhere and set a day each month to track your progress.

A Credit Card is Not Free Money

A credit card is a useful tool in your finance toolkit, but it’s not free money.

When you purchase something with your credit card, you are borrowing money from the bank. If you don’t give that money back in time, the bank is going to start charging interest on your balance.

This debt can build up and become a monster if you don’t pay off your balance every month.

However, if you use a credit card responsibly and pay off the balance every month, they’re a good way to start building credit. Most credit cards also have other benefits such as rewards, cash back, or travel points.

So, should you have a credit card?

Well, it depends. If you’re capable of paying off the balance in full every month, then you should have no problem managing a credit card and staying out of debt.

If you are going to use a credit card, you should monitor your credit score & credit report regularly with a free tool like CreditSesame.

One last tip: Treat your credit card as a debit card. Pay it off in full every day if you have to. I try to pay off my balance every couple of weeks so that I don’t forget.

Have an Emergency Fund

Red lock box with glass to be broken in case of emergency

If you lost your job tomorrow would you have enough money to live off while you look for a new one? If not then you’re not alone.

This study found that although Americans are doing a better job at saving, around 24 percent of them (57 million people) don’t have an emergency fund.

Now I don’t want to be a negative Nancy or a Debbie downer, but emergencies happen all the time. They may not happen to you, but it’s always good to be prepared.

You can’t predict an emergency, but you can prepare for one.

The best way to do so is to set up an emergency fund of 3-6 months living expenses. That means if you lost your job tomorrow, you’d be able to live off your emergency fund for 3-6 months while you look for a new one.

Here are some common financial emergencies:

  • Job loss
  • Car problems
  • House repairs
  • Natural disaster
  • Medical or dental expenses