Personal Finance: Your Ultimate Guide to Financial Planning in 2020
Taking control of your personal finances is one of the most freeing feelings in the world. When you have plans in place to handle your bills, grow your savings, and prepare for retirement, you can feel true peace of mind.
In this personal finance guide, you’re going to learn what personal finance is, and why it’s important that you get started on your plan right now. After that, you’ll learn what your biggest priorities should be if you’re a teen, 20-something, or older adult.
What is Personal Finance?
Personal finance refers to all of the ways that you manage money to meet your individual or family goals. A good personal finance plan will consider the types of accounts you use, the investments you make, and the insurance policies that you use to protect your assets.
In addition to being a general term, personal finance is also a skill. You can become more effective at managing your funds when you take the time to do research and experiment. The reward could be a better financial future than you ever imagined.
Why Should I Care about Personal Finance?
You should care about personal finance because it will be an important part of your entire life.
Why is personal finance important? It’s important because putting a plan in place will give you the freedom to do more of the things you want in life while dealing with less stress.
Money is one of the biggest stressors in people’s lives. Personal financial planning can help you identify financial risks in your life so that you can resolve them and never worry about them again. It can also help you grow your nest egg or afford more of what you really value.
How Should I Manage my Personal Finances?
You should manage your personal finances by turning your needs into short-term and long-term goals. Then, consider what changes you’ll have to make in your life or financial plan to reach each one.
There are many personal finance strategies that can be used to put you closer to your goals. Here are some practices that have helped many people take control of their financial future:
- Budgeting: Budgeting is a primary practice that will allow you to measure where your money is going so that you can direct it toward the goals that matter most to you. Starting a budget is one of the first steps toward taking control of your finances.
- Debt resolution: Even overwhelming debts can be reduced and eliminated with the right planning. Solutions to large debts include consolidation, overpayment, and if necessary, bankruptcy.
- Savings: You’ll need to develop savings for any type of financial plan. You should hold enough savings to weather emergencies before you start building savings for other needs.
- Investing: You can magnify your income by investing the money you make. Most financial plans are developed to help you increase the amount you can invest over time.
- Insuring: Protecting your existing assets is important. You can do this by getting insurance policies to cover your health, home, and vehicle. You must carefully balance the costs of these plans against the importance of the asset they’re protecting.
The priority that you give to these practices may change over the course of your life. It depends on where you are in life, so you need to understand how to manage your finances as a teen, young adult, and older adult.
Managing your personal finances as a teen
It’s important to start your financial planning as early in life as possible. Personal finance for teens is focused on the steps that matter most at this early stage. Even a teenager can make important decisions that will have a lifelong impact.
- Open a checking and savings account: You should begin to familiarize yourself with both checking and savings accounts while you’re still in your teens. This will help you build a credit history for your future financial plans.
- Save as much as possible while your living expenses are low: You may be able to save a lot more than you expect as a teen. This is because your living expenses are low. The money you save now can be a foundation for lifelong savings.
Managing your personal finances as a 20-something
Starting in your 20s, you will start to make more money, while dealing with more serious adult expenses. At this point, it becomes necessary to do deeper research into how people of your income level are managing their finances. You can talk to a specialist or start reading personal finance blogs for 20 somethings.
- Maximize your earning potential: Take advantage of your energy and the skills you’ve developed to maximize your earning potential, starting in your 20s. Don’t be afraid of moving jobs or fields in order to claim better opportunities.
- Develop your long-term savings plan: Even at 20, you need to get ready for later adulthood. Start thinking seriously about how you’re going to manage such goals as homeownership.
Managing your personal finances as an older adult
The time between older adulthood and full retirement can seem like it’s passing very quickly. If you haven’t started planning yet, you need to take it very seriously now. Taking personal finance classes for adults can help you catch up with what you still need to learn.
- Make sure that you’re set for retirement: Make sure that you can continue to draw income if you become unable to work. Focus on funding your pension, 401k, or other retirement plans.
- Develop a post-employment budget: Your spending habits may need to change considerably as you grow older. Start developing new budgets that account for any decrease in your spending.
Plan Your Financial Future the Right Way
Financial planning matters in every stage of life. Make sure that you’re applying the right practices to meet your goals, and that you’re considering how things could go wrong. With financial planning in place, you’re better protected from the worst possibilities.