Navigating Personal Finance: A Beginner’s Toolkit
Nearly half of Americans classify themselves as “broke.” Two-thirds report that they are living paycheck to paycheck. Given the high inflation rates, record household debts, and average wages, many struggle to keep up with the rising cost of living.
It is easy to ignore your financial situation—until you notice your debts pile up.
Those who have never paid attention to their finances may struggle to get started. It can feel overwhelming, and you might not know where to begin.
The good news is that it is never too late to start prioritizing your finances. With this toolkit, you can save for the future and reduce expenses.
Make Use of Financial Apps
Technology is constantly evolving. Today, countless financial smartphone applications are available to help beginners understand their money. From budgeting to saving and investing apps, here are some top picks to consider:
- SoFi: Best investing app for beginners. It has a user-friendly interface and offers resources to guide your investing decisions.
- Goodbudget: Best budgeting app with free options. You input all your expenses and income to create a budget.
- PocketGuard: This app offers you a simplified snapshot of your budget.
- YNAB: You Need A Budget (YNAB) is more than just a budgeting app. It also helps you save and manage your finances.
- Honeydue: The perfect budgeting app for couples.
Manage Your Debts
Seeing the amount of debt you’ve accumulated over time can be overwhelming. Fortunately, there are strategies that make repayment manageable.
Once you have set your budget, you can get a clearer picture of your finances. You’ll see where you can divert more funds to start repaying your debts. There are two schools of thought when it comes to debt repayment, and you get to decide which one works for you:
- Begin by paying off high-interest debts first, as these tend to be a significant expense and stressor.
- Pay off your small, low-interest debts first to keep yourself motivated before you move on to the larger debts.
These two debt-repaying approaches are contrasting. Only you will know which one will work with your current financial situation.
Start Investing
Investing has become more accessible thanks to the rise of online investment platforms. Before you get started, you have to determine your long-term investment goals. From there, you can begin considering different platforms and asset options.
Robo-advisors are generally a good option for complete beginners. These automated services offer investment advice and assist you in managing your investment portfolio based on your goals and risk tolerance.
If you prefer a hands-on approach, consider choosing a self-managed investment portfolio, where you make all the decisions. Note that you must be financially literate if you pursue this option. Otherwise, you risk losing money.
Track Your Credit Score
Tracking your credit score is crucial, as you will struggle to get loans with a poor score. Or, if you do get a loan, you will be stuck with incredibly high-interest rates.
Use credit score tracking services to keep an eye on your credit score. This tool gives you regular updates, letting you see any changes or improvements to your credit score. This information will help you take proactive steps to boost your score.
Remember, a good credit score is ideal. It lets you access better borrowing options, such as lower interest rates and better credit limits.
Final Thoughts
Budgeting, saving, and investing don’t have to be complicated. Plenty of tools are available to beginners to get them started and help them along their journey.
Online platforms and smartphone apps are becoming the norm for many novice investors. They allow you to invest and save without meeting with brokers or financial advisors. These platforms also come with resources to guide you.
Our last piece of advice is to always live within your means and avoid overspending. Avoid racking up debts, and make sure you have a savings plan for the future.
