4 Financial Tips For Beginners

There’s so much financial advice out there it’s hard to know who to trust and where to start. Whether you’re on your own for the first time or are ready to commit to fixing past financial mistakes these 4 tips will get you started:

Tip 1: Start an emergency fund

This is the single most important point for anyone who wants to take (and keep) control of their finances. A properly funded emergency fund will give you peace of mind and can help you handle life’s little financial surprises without having to turn to your credit card, or worse.

Advice on how large of a fund you need usually varies from three to six months of your expenses, or more if your income is irregular. And I would agree that three to six months is a good baseline. However, if it’s too daunting of a task to think about saving that much, I would encourage you to consider starting by saving $250. With as little as $250 in the bank you can usually handle those unexpected expenses like that blown tire that needs to be replaced or the school trip your child forgot to mention.

Trust me when I say, it will be very rewarding not to have to turn to your credit card every time an unexpected expense pops up. And once you hit the first milestone of $250, set another one, and another, and another until you can cover just about surprise that pops up.

Tip 2: Stop paying fees

Running a few days late on your cell phone bill? No problem. Need cash quick and your bank’s ATM not around? Cool. Don’t have the time to shop around and get a free checking account? Don’t worry about it. For a couple dollars here and a few more there, all of your financial institutions will help you out. For a nominal fee, of course.

If you value your money at all, you have to stop paying fees. Banks, credit cards, ATMs, utility companies, and more are all willing to take your hard-earned money as often as you’ll give it to them. But you don’t have to give it to them!

There are a ton of ways to reduce and eliminate fees from your budget. If you have regular income that is direct deposited or can keep a minimum balance in your account then most banks or credit unions won’t charge a fee for your account. If it’s late fees that get you in trouble, then it’s time to consider scheduling automatic bill pay to cover at least the minimum required to keep you fee free. And if sometimes you just don’t have the funds to keep up with the bills (see Tip 1) and get started on your emergency fund.

And think, all the money you save on fees can be added to your emergency fund which will help it grow even faster.

Tip 3: Prioritize

It may seem obvious but the quickest way to get into financial trouble is to buy things (on credit) that you don’t really need and that you really can’t afford. The solution to this problem is equally obvious: STOP. But, while the solution may be obvious, it definitely isn’t easy. We live in an instant gratification society, but unfortunately, most of our incomes just don’t support a lifestyle where we can have anything we want any time we want it. So, the true solution is to prioritize where you spend your money.

Your first two priorities should always be your living expenses and your savings. Trust me when I say there’s no material thing that you can buy that’s more important than making sure that you have a roof over your head and food to eat. Once your bills are covered (and preferably paid in full) then you should prioritize your savings. Whether you’re saving for an emergency fund (see Tip 1) or retirement life you’ll be much more comfortable knowing that you can handle life’s inevitable emergencies. Any amount that you can save now will have the potential to grow exponentially in the future. So, the earlier you start the more you’ll end up with later.

After you’ve paid your living expenses, bills, and contributed to your savings you can prioritize everything else. The easiest way to do this is to calculate how much money you have left over after everything else is paid. But, you have to ensure that you don’t spend more than you have left. One easy trick is to jot down all the thing you want to spend money on and rank them in order of importance. Do as much of the list as you can afford and then roll everything else to the next month and repeat.

Tip 4: Use credit wisely

It can be tough to get through daily life in the US without having credit. And, the truth is credit has a lot of great uses but it also has a significant financial cost if you don’t use it wisely.

Your credit score can be used by utility companies, insurance agencies, and potential employers so it’s incredibly important to keep as high a score as possible. The best thing you can do for your credit score is to make sure that you’re paying your bill on time. Even if you can’t pay the bill in full, paying at least the minimum balance will help improve a bad score or maintain a good one. And paying on time will eliminate some of those pesky fees (see Tip 2).

If you’re just getting started, look for a credit card with low or no annual fees and one with low interest rates. After you’ve been approved for credit, you can start to build your credit history by using the card to charge a small number of transactions. But keep in mind, to build a positive credit history you want to make sure that you’re paying the full balance on time every month.

Start strong and keep going…

There’s a lot of financial perspectives out there and it can be tough to identify where to begin. Regardless of where you are in your financial life, developing these four habits will help you move forward on the right path.

Happy Getting Started.

Daysha Carter is a personal financial coach based in Seattle, WA. If you’re struggling with your finances and want assistance getting to the next level schedule a free consultation at www.everydaybudgeting.com.