My mom recently asked my if my partner and I spent money in the same way, and I didn’t know how to respond. Welcome back to Common Cents, where we explore the what, how, and why of our money spending habits.
TL;DR
Personal finance or financial planning is you decide to use your money and why.
Map out what matters to you, and work backwards from there. Use tools like autopay, tax free, and set it and forget it.
If you take away anything, think about your money! If you can, learn by doing.
What is Personal Finance?:
My mom recently asked my if my partner and I spent money in the same way.
“Errrrm. Yes???” I struggled to respond.
“Julianne, people break up because of family, religion, and money.”
With that, welcome to a brief post on personal finance! This will be a compilation of quick tips I’ve learned over time that have worked for me.
Investopedia calls Personal Finance: Smart strategies for banking, budgeting, loans and credit, renting or buying, retirement, insurance, taxes, and more.
Soooo, it’s broad!
To me, personal finance (sometimes called financial planning) is how you decide to use your money and why.
I’ll talk about tips that I’ve used to feel better about how I spend, save, and invest. Holler if they work for you!
How Does Personal Finance Work?
Here are some tips I keep in mind:
Keep the end in mind: Ask yourself, what are my goals with my money? This month? This year? In the next five years? It might be saving $10 a month. It might be paying off student loans.
Begin where you are: We have all different financial pictures. I like to start with - what are my required monthly expenses? Do I have debts or loans I need to pay off? What’s my monthly rent?
Autopay: I do everything I can with autopay. I’m not great at keeping a budget, so I tend to pay for things before it ever hits my bank account.
Step 1: I auto invest in my companies 401K plan, so I never see the money. If you don’t have a company 401k, Roth IRAs are a great option.
Step 2: I have auto pay set for my loans. I pay my credit card in the full amount each month. With loans (student, housing), it’s always best to pay off your loans payment each month. And it’s usually best to pay off loans as quickly as you can.
Step 3: Then, I automate all my bills for rent, credit card, other bills, and savings.
Set it and forget it: I do my best to automate savings. I have a small amount that automatically goes to Vanguard each month.
Anything Tax Free helps! Try to save for retirement, if you can!
Saving for retirement is a great way to save and invest. If you can, use your companies IRA - contribute the max the match.
And/or contribute to a ROTH IRA if work for yourself.
Have a partner? Every person and every couple is different. In addition to the above tips, talk about you need and like to spend money on!
Do you spend money differently? Consider getting a joint account that you both add money to for shared expenses, but keep separate accounts for other items.
Do spend more similarly? Combining finances might make more sense. You can more easily saved for a shared expenses.
(Pro tip: If you Venmo back and forth, use private mode!)
Have more questions? A bunch of firms like Fidelity and Vanguard will offer a free financial planning session for prospective clients. I’ve found these helpful (though I have not yet signed up for a financial advisor, sorry guys!)
Why Does Personal Finance Matter?:
Empower yourself! Even though I work in finance, I had to start small with my own personal finance, and it took me some time to build my confidence spending, saving, and investing. I learned by doing, and by making mistakes. I still remember the first time my credit card charged me for not paying on time...I went to autopay and I never looked back.
Additional Reading:
How the Economic Machine Works, Ray Dalio
Thanks to my friend Zack for the newsletter idea :)