First Published: 14 May 2021
Change The Way You Think About Money
At the turn of each year, we all have our dreams and we possess new levels of energy to achieve them. We set Personal Financial Goal and we hope that the personal finance tips we’ve learned in the past will be enough to help us reach our goals. These expectations never go away, everybody wants to succeed, at least in their minds but not everybody will unless they take action. Now is the time to take stock and look at the list of these 24 personal finance tips you should take if you want to improve your personal finance this year.
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REVIEW YOUR PAST YEAR FINANCIAL PERFORMANCE
The first thing you should do is to analyse the past financial history. Review your financial activities for the past 12 months. Look at your earned income and your expenses. Break it down to get a clear picture of where you are now. It might take you a few days but this is a 30-day plan so take a few days to get all the facts in place.
Create an income and an expense spreadsheet. Record every entry into this spreadsheet to give you an idea of where the money is coming and going.
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START WITH A PERSONAL FINANCIAL CHECKLIST
The next step is to create a checklist of all your financial matters. Have a separate section for emergency as you plan your journey to financial freedom. This is because emergency situations will always arise and you have to be prepared for it in your plan.
The best way to create this checklist is to break each financial matter down into months.
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SET YOUR GOALS – MAKE THEM REALISTIC FINANCIAL GOALS
After you create your checklist, the next step is to set up your personal financial goals. Attach a specific date on which to achieve your goal.
Be specific with your dates. When your goals are specific with a time frame you are more likely to achieve them than when there is no time frame.
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CREATE YOUR BUDGET – KEEP IT SPECIFIC
Once you set your budget, learn to work within it. That way, you can meet most of your financial plans. If you cannot manually plan your budget, use one of the numerous apps available on the App store to help you. Use these Apps to help you stay within your budget and create a disciplined approach to your spending. Don’t try to budget in your head, write it down so that it is specific.
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SAVE FIRST BEFORE YOU SPEND
If you can live by this rule you will achieve financial independence much faster. For every dollar, you earn, save at least 10% of it. The way to achieve this is to pay yourself first. Discipline yourself to put 10% in your savings account as soon as your earned income hit your checking account.
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GOOD DEBTS AND BAD DEBTS – DO YOU KNOW THE DIFFERENCE
Understand the difference between Good Debt and Bad Debt. Wealthy people use Good Debt to generate cash flow and reach financial freedom when they manage it well.
Bad Debt, however, is used to buy things that lose value quickly, like cars or expensive clothes. This type of debt can strain your finances because you have to make high payments to keep up with it. Try to avoid Bad Debt as much as possible.
Good Debt helps you buy assets like real estate, businesses, and stocks. These assets usually increase in value over time, especially with compound interest, which supports your journey to financial independence.
In contrast, Bad Debt funds non-essential luxuries like vacations or designer items. Instead of growing your wealth, Bad Debt takes away your money. Avoid Bad Debt at all costs.
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PAY OFF YOUR HIGH-INTEREST DEBTS FIRST
Start by making a list of your bad debts in order of their sizes and interest charged. Then settle debts with the highest interest rate first. Then once that is paid off, tackle the next highest until you get to the debt with no interest charge on them.
Once you start paying off the highest interest debt first, allocate the minimum required to all the other debt. Then assign all the payments from the highest debt you’ve paid off to the next debt. As you pay off your debt, you are also reducing the interest rate charges on your debt which will help you pay off your debt much faster.
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LIVE WITHIN YOUR MEANS
By living within your means, it means not spending more than 10% of your income on any project that you have not previously saved for.
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STOP ENTITLEMENT MENTALITY
Nobody is entitled to anything for free, implant this into your mind and motivate yourself never to forget it. By setting your financial goals, you are taking responsibility for your future.
The most successful people don’t sit there and wait for something to happen. They make things happen. They struggle through failure after failure never giving up until they succeed.
So, don’t give up on your Goal too easily when the going gets tough. When the going gets tough the tough get going. Have that mindset and work harder to create your success.
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AVOID GAMBLING AT ALL COST
A few will be lucky to hit it big. However, the vast majority of people will never win anything big. The wealthiest people know that waiting for some big windfall may never happen so they don’t bet the future on luck. They know that luck is a deliberate effort of an individual therefore they diversify their portfolio before engaging in any gambling game.
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WHAT ARE THE THREE TYPES OF BANK ACCOUNT YOU SHOULD OPERATE
Managing all your money in one bank account can be confusing. It can also make it hard to budget and track your savings for long-term goals. A better way is to use three different bank accounts, each with a clear purpose.
The first account is your main checking account. This is where your money goes when you get paid, like your salary or earnings from a business. It acts like a hub where all your money first arrives before it goes to other accounts.
The second account is your savings account, which some people call the “pay yourself first” account. This account is important for building your financial security. It helps you save for emergencies or big plans, like buying a house or investing. It’s helpful to set up automatic transfers to this account, making saving a regular habit.
The third account is your spending account. Here, you put the money you plan to use for everyday expenses, like bills, groceries, and transportation. By keeping your spending money separate from your income and savings,
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TRACK YOUR NET WORTH REGULARLY
It’s important to know how much money you have and how much you owe. This is called your net worth, and it helps you manage your finances better. Many people don’t know how much they are really worth because they haven’t counted what they own and what they owe. Knowing your net worth helps you understand your financial situation and see how you are doing over time.
To start, make a list of everything you have, like cash, savings, investments, property, and valuable items. Next, make a list of what you owe, including loans and credit card debts.
To find your net worth, subtract the total amount you owe (liabilities) from the total value of what you own (assets). This number can help you set realistic money goals and make better decisions about your finances. As you save money and pay off debts, your net worth should go up, showing that you are managing your money better.
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DIVERSIFY YOUR INVESTMENT PORTFOLIO
Investing in different types of assets is an important way to reduce risk and strengthen your financial future. By spreading your money across various categories—like stocks, bonds, real estate, and other investments—you can lessen the chance that a drop in one area will hurt your overall financial situation. This approach helps create a balanced mix of risk and reward, since different types of investments respond differently to things like inflation, interest rates, and government policies.
For example, stocks usually do well during good economic times and can increase in value, while bonds and real estate can help create a sense of security, and steady income when the market is uncertain. Having a diverse portfolio reduces your dependence on one type of investment, allowing for steady growth even if some areas don’t perform well.
It’s also important to have multiple sources of income. Relying only on your job can be risky, especially in a job market that’s always changing. Finding ways to earn extra money—like freelance work, starting a small business, or using special skills to make money—can give you extra security. A good side job can increase y
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CREATE PASSIVE INCOME
This is key to achieving financial and time freedom is to build passive income and wealth. You must create activities or buy assets that generate income while you sleep. Use technology and the internet to get involved in some of the many lucrative online businesses that would help you generate an income passively.
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INVESTING WISELY – LEARN THE RULES QUICKLY
Make sure to follow the rules of investment philosophy, that is:
- Never invest in anything you do not understand. Get the required knowledge before plunging your hard-earned money into any venture.
- Never invest money you cannot afford to lose. Investment can be a risky venture, so have liquid cash you can fall back on if your investment fails.
- Learn about the rule of Compound Interest.
- Learn about the laws that govern your area of activity and stay within the law.
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ENGAGE IN YOUR PASSION AND HAVE FUN
Learn to be passionate about what you do. Have fun and enjoy life to the fullest. If you don’t enjoy what you are doing, you are more likely to quit. Always give yourself enough time to see the fruits of your labour.
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EXERCISE REGULARLY TO KEEP YOUR MIND AND BODY SHARP
Exercise to keep your mind and body alive and active. Eat well and stay off unhealthy meals and drinks.
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HEALTHY BODY HEALTHY MIND – MAKE IT A PRIORITY
Make your health your number one priority. Because without good health any wealth you create in the future would be worthless, you will not be there to enjoy it.
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BE FLEXIBLE AND BE READY TO ADJUST SWIFTLY
Plan ahead, but also plan to change when the environmental condition change. Do not be too rigid that you find it difficult to make adjustments. Things will happen along your financial freedom journey and you will need to adjust to the evolving condition along the way.
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WORK SMART NOT HARD
The internet has changed the world we live in. While you are working 40 to 60 hours a week to keep your 9-5 job, lots of people are doing fewer hours and making 6 figures and creating wealth. The rule is to work smart and not hard.
Think of ways that you can disrupt the ways things are being done now and change it for the better. Make it faster, cheaper or better. If you have a huge social media following, can you engage them in your journey? The more people you help the more money you will make.
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AUTOMATE – USE TECHNOLOGY TO AUTOMATE YOUR SAVINGS AND EXPENSES
This is the age of technology. Try to automate everything including all your banking activities. This can easily be done on your mobile phone. By automating your savings and spending, you don’t overspend on your budget. Be creative and use technology to help you achieve your personal financial goals.
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CHARITY BEGINS AT HOME – GET INVOLVED WITH A CHARITY
By being charitable, you can give 5% of 10% of your income to your favourite charity. You can give your time freely to a worthwhile cause. You can coach, teach or provide service for free one day a week or even a few hours a week. It’s up to you how you choose to do it but it is a worthwhile cause.
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PLAN FOR RETIREMENT – START YOUR RETIREMENT PLAN EARLY
Retirement planning is for a time in the future when you are no longer young and vigorous and so you want a life of less work and less stress You can achieve that goal by planning well in advance.
A great time to start is when you are in your early twenties. Start your retirement savings account early and have your insurance policy in place too. Create an investment portfolio that will generate income when you retires. How about your stocks and shares and real estate investment? If you don’t plan for your future early it gets more difficult as you get older. Don’t rely on the government state pension scheme.
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HAVE A MENTOR- SELECT YOUR MASTER MIND TEAM
Have a mentor to help you achieve your goal. Your mentor should be someone who has done it and can teach you the shortcut. A mentor will help you get to your destination faster and more smoothly than they did. Ask for help and you will achieve your goals faster.
START NOW, DON’T WAIT UNTIL IT IS TOO LATE
Finally, it is never too late to start planning towards your financial independence. You can start putting in the hard work now and realize the benefits later. Review your plans regularly to stay on track. Good luck!
Related articles:
How To Plan Your Financial Goals Like A Financial Planning Master
How To Budget For Financial Independence
FAQ’s
What are the 5 C’s of personal finance?
The 5 C’s of personal finance are basically the key things lenders look at when deciding whether to lend you money — and they’re also helpful for understanding your own financial health. Here’s what they mean:
- Character: This is all about trust. Lenders look at your credit history and past financial behaviour to get a sense of how reliable you are when it comes to paying back what you owe.
- Capacity: Your ability to repay a loan. It’s based on your income, your existing debts, and how comfortably you can manage another payment.
- Capital: This includes your savings, investments, and any assets you own—basically, the resources you already have. Substantial capital shows financial stability and can make you a more appealing borrower.
- Collateral: Valuable items you can offer as security, such as a house or car. If you are unable to repay the loan, the lender can take the item you used as security to recover their money. This helps reduce their risk.
- Conditions: This covers the bigger picture—things like the current economy, the terms of the loan, and how the money will be used. These factors help lenders assess overall risk and determine whether the loan makes sense.
Understanding these conditions is crucial, as they influence both the loan’s risk profile and its alignment with the borrower’s strategic objectives.
These things help banks decide how risky it is to lend you money. They also help you see how you can improve your financial situation.
What is the 50/30/20 rule in finance?
The 50/30/20 guideline is a budgeting method. It divides your net income into three categories.
- Half of your money (50%) should be spent on important things like where you live, food, and getting around.
- Thirty per cent (30%) can be used for things you want to buy for fun, like going out or travelling.
- The last twenty per cent (20%) should be saved, used to pay off any debts, or put toward future investments.
This simple system helps you keep your finances balanced and encourages you to improve your money situation over time.
What are the five basics of personal finance?
The 50/30/20 rule is an easy way to keep your money on track. It breaks down your take-home pay into three simple buckets:
- 50% for needs — things you absolutely have to pay for, like rent, groceries, and getting to work.
- 30% for wants — fun stuff like eating out, hobbies, or travelling.
- 20% for savings and debt — this part goes toward building your savings, paying off loans, or investing for the future.
It’s a straightforward system that helps you stay balanced and make steady progress with your finances.
What are the five basics of personal finance?
These five fundamentals are the building blocks of good money management:
- Earning — The money you make, whether from a job, side gigs, or other income sources.
- Saving — Setting aside money so you’re prepared for surprises or future goals.
- Budgeting — It means knowing where your money goes and spending it wisely.
- Investing — This is about putting your money into things that can help it grow over time.
- Protecting — This involves using insurance and other measures to safeguard your finances.
Mastering these basics can help you build a solid financial foundation and feel more confident about your money decisions.
What is the 3 6 9 rule in finance?
The 3-6-9 rule helps you know how much money to save for emergencies. It says you should save:
- At least three months of essential expenses if you are single.
- If you’re married or supporting someone else, aim for about six months’ worth.
- And if you have kids or your job isn’t very secure, it’s wise to build up about 9 months’ worth of savings for your expenses as a safety cushion.
This rule helps you save enough money to cover costs like losing your job, getting sick, or unexpected expenses without going into debt.