6 Financial Life Skills To Manage Personal Finance
17 AUGUST 2023
Stepping into the world of personal finance can come with many things to remember. Here are a few financial life skills to help you manage your personal finance, at every stage of your life.
Budgeting and Saving Skills
Knowing how to plan and keep a budget is one of the most important skills you can have. It is the most basic form of saving and should be an essential step during your adult life. Having a budget allows you to keep track of how much money is coming in and out, and where you are spending your money. It’s a very simple task to do with the help of many mobile apps out there.
There are a few different budgeting methods and techniques to choose from that’s perfect for you. Depending on what your goal is for budgeting, whether to track your spending, to track your income or to track how well you can keep to a budget, finding the right budgeting method is important. Set your financial goals and review your progress each month to make changes where you need to.
Saving is crucial to give you a step up when reaching your goals and dreams. As well as helping you create a cushion should you need extra money on hand. Especially during today’s uncertain times, saving gives a little more security.
Credit and Debt Skills
Credit is a very useful tool when used correctly. To have a good relationship with credit, you need to start building a good credit score as soon as you can or are earning an income. The most important thing to remember is to pay your repayment instalments on time, every time.
Credit card debt for example can easily rack up when you’re spending too frivolously and not being wise with your purchasing choices. Avoid making many small purchases with your credit cards, they’re better used for emergency purchases. Managing your credit can help you build a good credit score. Here are 6 ways to manage your debt to keep in your back pocket if that time comes.
Credit cards are prone to identity theft. And with the increase in online shopping, your financial information is even more open to fraud. Protect your information with strong passwords, two-factor authentication, and limiting what you share online or with who you share your cards. Read further to learn more about other types of financial fraud.
Know the difference between your Wants vs Needs
This skill will come in handy when assessing how you are spending your money and where you can afford to cut back. Your needs are everyday things that you need to survive, for example, food, shelter, clothing etc. Wants are the things we can do without; takeaways, gifts, the latest technology or appliances, etc. These are what we can cut spending on, to help save up for needs or an emergency fund. Make sure you’ve catered for everything you need and some of your wants so that you can live a good standard of life.
Long-Term Financial Planning
Start planning your long-term financial goals when you can, to get a head start on where you see yourself when you’re older. One of those plans should be setting up an emergency fund. An emergency fund consists of money put away in case of real emergencies, from unexpected hospital bills to major repairs. This fund will keep you secure in case your savings don’t cover what you need to pay.
Retirement is something that most of us dream of. Planning for it when you’re young will take the stress away from the future. Estimate how much you might need to have by the time your retire to be comfortable, for example, your living expenses or healthcare costs. Include in this estimation how much in retirement assets you will need for when you plan to retire. Take into account these estimations when budgeting to keep you on track for setting up your future.
Remember that you can talk to a financial planner to assist you in navigating your long-term financial plans. So that you’re fully prepped for what life throws at you.
Be Aware of Financial Fraud
Financial fraud happens when a criminal takes money or assets from another through the criminal use of someone else identity or deception. This type of fraud has direct implications for your financial status, so it’s important to keep your information and assets protected. For example, if a criminal had a hold of your credit information your credit card, they could make exuberant purchases that you will have to pay for.
The different types of financial fraud are; phishing scams, counterfeit credit cards, identity theft, and Card-Not-Present fraud. Learn more about credit card fraud. Investment fraud is another type of financial fraud that involves the illegal use or sale of investments. Mortgage and lending fraud involve professionals trying to fool the system using falsification or other criminals using identity theft.
Understanding Interest Rates
Interest rates are very important in the world of finance. These are what determine what your loan or credit terms are and in turn, determine how much you will need to be paying back each month. It’s good to have an understanding of how interest rates are calculated when you’re applying for personal loans, to assess whether you can qualify for them.
These skills and understandings will help you navigate your way around finance. Visit any of the articles linked if you need a refresher.