Personal finance is something that everyone has to deal with at some point in their lives, whether a minor purchase or a significant life event like buying a home or planning for retirement. It can be intimidating, but most people don’t know where to start when managing their money effectively or what “managing your money effectively” even means. Here are the five best personal finance resources that can help anyone get started on their path toward financial independence:
Have an emergency fund
The most important thing you can do to keep yourself financially healthy is to have an emergency fund. An emergency fund should be made of enough money to cover three to six months of living expenses in a financial crisis. For example, if the average cost of your mortgage or rent is $1,200 per month and your monthly income is $2,500, you would need between $7,000-$15,000 in cash savings for emergencies.
Buy term life insurance
Term life insurance is the kind of coverage you get when you’re young, healthy, and have no dependents. It’s designed to protect your family members if something happens to you. If you were to die during your policy term, they would receive a lump sum payment equal to your death benefit amount. This can help them pay outstanding debts or mortgage payments, college loans, and more.
Term life insurance policies usually last anywhere from 10 years to 30 years—but if you want coverage longer than that (and who doesn’t?)whole life is another option with a “permanent” cash value attached to it after premium payments have been made over time.
Open a retirement account
A retirement account is a long-term savings tool to help you reach your financial goals. These accounts are tax-advantaged, meaning they can provide valuable benefits that might not be available in other accounts. For example, employers often match employees’ contributions to their employer-sponsored retirement plans. In addition, some retirement accounts have special rules regarding how money can be withdrawn without penalty during certain life events like having a child or buying your first home.
Pay down high-interest debt first
This is pretty simple, but it’s important to note that high-interest debt can only eat away your income if paid for a short time. For example, if you have $10k worth of credit card debt with an 18% APR and only make minimum payments, it would take you over 14 years to pay off that debt. That’s a long time to pay more than $100 per month on interest alone, money that could have been going toward savings or investments. Instead, invest that money and watch it grow while you continue making minimum payments on the credit cards.
Check for potential tax breaks
Tax breaks can be a great way to reduce your tax liability, and there’s no shortage. They can take the form of deductions or credits, depending on what type of income you earn and how much you make.
Conclusion
Personal finance can be confusing and overwhelming; however, if you know the best personal finance resources, your life will be way easier. The five strategies outlined above are simple enough for anyone to follow. They will help you organize your finances and focus on other things.
