Last Updated June 29, 2024 by Davina Kelly
Are you looking for some personal finance tips to help you improve the way you manage your money? In this post, I will share some ideas.
Learning how to manage your money is very important as your financial situation impacts the quality of your life.
As someone who once struggled to manage their money, I will share the things that helped me to get out of debt, grow my savings and improve my relationship with money.
This post is all about personal finance tips.
What Is Personal Finance?
For individuals like you and me, personal finance refers to the way you manage your money as well as saving and investing. The main areas covered in personal finance are as follows.
Income
Income is the foundation of your finances. This includes money coming in from your salary, dividends, and other sources such as side hustles.
The amount of money you have coming in dictates how much you can afford to spend, save and invest.
Spending
Spending is the amount of money you have going out. The bulk of your income is spent on paying for things like rent, mortgages, bills, groceries, entertainment, and eating out.
Spending is the part that trips most people up with their finances, as we tend to have more money going out than coming in which can lead to you being in debt.
Saving
Most people use the money left over after spending to save, while others save before spending. This is often what people refer to as paying themselves first. Either way, it is essential to save!
Investing
Investing involves putting your money into assets like stocks to earn a return on your money.
The goal when investing is to grow your money and build wealth. However, it does come with some risks and you can incur a loss. It can seem overwhelming if you are not familiar with how it works. In that case, I would recommend taking some time to educate yourself on the subject.
I have a blog post that is perfect if you are a beginner. It explains everything in a simple way that is easy to digest. You can read it here.
Debt
Debt is inevitable to a degree but not all debt is bad.
Consumer debt is bad debt as this is the debt that comes with high interest rates. It is defined as money owed for things that are consumable and do not appreciate in value.
This includes personal loans, car loans, and credit cards. This type of debt can have us caught in the trap of working just to pay bills and pay off debt.
However, if the debt is used to generate income it isn’t necessarily bad debt.
For example, if you took out a mortgage to buy an investment property this isn’t bad debt. This is because you have used the debt to purchase an asset that will appreciate and make you money.
In the future, the asset will increase in value and can be used to pay off the debt. This type of debt does incur interest, but not at a high rate.
Protection
Protection refers to the methods taken to protect yourself from unexpected events such as illness or accidents. Some of the methods taken are life and health insurance and estate planning.
Why Is Personal Finance Important?
Personal finance is important because it can determine the quality of your life. The decisions you make in your life largely depend on your financial situation.
If you have a good relationship with money and you have some investments, savings, and no debts you will feel financially secure. Therefore, the decisions you make will be based on what you want to do, not what you have to do because you are worried about money.
In school, unfortunately, we were not taught how to manage our money, so most of us had to figure it out for ourselves through trial and error.
Now, we have the chance to educate ourselves and learn the best ways to manage our money and reach our financial goals.
Learning personal finance skills is crucial. It can help you move from constantly worrying about money to having freedom and more choices. Without these skills, we will never get ahead financially and be free to live the life of our dreams and I want that for all of us 🙂
Best Personal Finance Tips:
1. Understand Your Current Circumstances
Something bad usually happens with your finances to trigger you to want to learn how to manage your money better.
For me, it was spending more money than I was making which led to me being in debt. As a result, I now spend less money than I make and I save a lot and invest in the stock market.
But you don’t need to wait for something to go wrong before you start learning how to manage your money.
If you are living paycheck to paycheck you can implement some of these tips to improve your finances before something bad happens.
Understanding your current financial position is an important part of personal finance. Knowing this will help you to understand the areas you are doing well in and where you need to improve.
Think about this and be honest with yourself. Are you struggling to pay your bills? Do you have a good relationship with money? Do you have money saved up for emergencies?
Once you have answered these questions you will know which areas you need to focus on as a priority.
2. Create a Budget
Having a budget is an important tool for your finances. A budget is essentially a plan, and having a plan will give our money direction.
When you get paid you will know where your money needs to go and it can stop you from spending money on things you do not need.
I would recommend creating a budget for a full year. This will allow you to see how much income you are expecting each month and the expenses you have, and you can incorporate your saving and investing goals. For example, if you want to save $10k in a year, you can include the amount you need to save each month in your budget to reach your goal.
Having a budget will also show you what you can afford which is key. For example, if you make $2,000 a month and all of your bills and expenses are $1,800 you will see that you only have $200 left over to save. From there, you can decide if you want to make some changes to reduce your expenses and allow you to have more money to save and invest.
When creating a budget you should include any one-off annual costs like insurance, MOT, and holiday costs. Including these costs in your budget will help you be as prepared as possible.
I have a post which walks you through the process of creating a budget, you can read it here.
You can put your budget together using my FREE printable budget template below
3. Spend Less Than You Make
Spending less than you earn is crucial when managing your finances. This is the part that trips most people up so you really need to focus on this area.
If you spend less money than you make it will allow you to save and invest more. If you have a budget in place you will be able to see this clearly and make some changes.
Review all of your current expenses and ask yourself if all of them are necessary. For example, if you have Netflix do you actually watch it every month? Or if you pay for a gym membership do you make use of it? If the answer is no, you should cancel them.
You can also look at the amount of money you spend on groceries and see if you can reduce the costs. Are there other grocery stores you could shop at that are cheaper but still have good quality food?
Another option is if you have any services like the internet, you can call the providers to see if they have any deals. If they don’t you can check price comparison sites to see the best deals available to you and make the swap.
Going through this process with all of your expenses will allow you to cut back and have more disposable income to put toward your goals.
4. When Your Income Increases Do Not Increase Your Spending
Receiving a salary increase at your job or having additional money coming in from a side hustle is great. It deserves to be celebrated, but it doesn’t mean you need to increase your spending.
It is tempting to start shopping at higher-end stores and eating at fancy restaurants when you start making more money, but it isn’t necessary.
The only exception to this is if spending more will improve the quality of your life. For example, if you could only afford a cheap internet service provider which meant it took you longer to complete your work because the internet was slow. Then yes you should spend more money on a better internet service provider. This directly impacts your work which impacts your income.
But if the quality of your life is ok, you don’t need to spend more to increase it. Instead, put the extra money towards growing your income and reaching your financial goals faster.
5. Prioritise Paying Off High-Interest Debt
As I mentioned earlier consumer debt is the debt you want to avoid, so I would make paying it off a priority. Paying this debt off will allow you to have more money to save and invest and it will also reduce stress as having debt can be stressful.
Quick Storytime, when I was younger I made the mistake of taking out a payday loan. This left me in the cycle of working to pay off the debt and take out another loan to get through the month. I did not have any savings so I was relying on the loan to get by each month.
This left me feeling stressed every month wondering when the cycle would end. Finally, I got a job paying me more money and was able to pay the loan off without needing to take another one out.
I was so happy to finally be out of that cycle and since then I have learned my lesson. The lesson I learned was poor money management will leave you one paycheck away from being broke! Spending more money than you make can lead to you incurring debt and having a savings pot is crucial! Now, I spend less than I make and I have built up a lot of savings.
If you want to learn the best way to pay off debt read here.
6. Build Up Your Savings
Having savings is important as it can give you a sense of security. You never know when an emergency can pop up and if you don’t have any savings you could end up overspending which can lead to you being in debt.
I learned this the hard way as you can see in my example above.
It is recommended to have an emergency fund and I totally agree with that. But I would recommend having more than one savings pot if you can.
Your emergency fund can be used for actual emergencies like covering your monthly expenses if you lose your job or if you have unexpected car or home repairs.
I would recommend having at least 3 months of expenses saved up for this, If you can save 6 months or more that is even better. This money can be left in a high-interest savings account that is easy to access. By doing this you will earn interest on your savings.
I would also build up some savings for yourself to spend on experiences. You could use it to book a nice holiday, a staycation or to go to the theatre. Spending money on experiences is an investment in yourself so it is definitely worth it. This can be included in your budget so you can contribute to it each month.
I know some people struggle with saving and I totally get it, I did too in the beginning. The easiest way to save is to spend less money than you make.
Saving isn’t entirely dependent on how much you make, it is a contributing factor of course. But the amount you spend compared to what you earn is what matters most.
No matter how much money I make, my outgoings do not change much. The only thing that changes is the amount of money I save and invest.
Adopting this mindset has allowed me to save money and reach my financial goals.
7. Find Ways To Grow Your Money
Growing your money is how you build wealth and we want to be wealthy. There are many ways to grow your money.
You can purchase assets like stocks or property and grow your money through the returns the asset makes.
Money is made from stocks through capital gains and dividends, these are passive strategies. Have you heard people talking about making money in their sleep? Well, this is how they do it.
The idea is that your investment continues to make money without you having to do anything extra.
You can also make money from stocks through trading, this strategy comes with more risk and is an active strategy as it needs to be managed.
With property, you can make money in many different ways. You could purchase a buy-to-let property and make money from the rental income. Another option is the rent-to-rent strategy or HMO (House with multiple occupants). You could also make money from capital appreciation when you sell the property.
Whichever option you choose, make sure you are educated in that area and fully understand what you are getting yourself into.
If you want to learn how to invest in stock, read here.
8. Make The Most of High-Interest Savings Accounts
The interest rates on savings accounts have increased this year as the Bank of England has made them higher to encourage people to save more and spend less.
This is intended to reduce inflation, read here to learn more about it from the Bank of England.
We should take advantage of the higher rates. If you have any savings that you don’t need in the short terso within the next 12 months, why not put it in a high-interest savings account and benefit from high interest?
This is a smart way to increase your savings, as you will be earning interest on your money. If you leave the money in a regular savings account it will decrease in value as inflation continues to rise. This will give you less buying power.
You could put your savings for your holiday in a high-interest savings account. You need to ensure you are comfortable with the terms of the account and know that you won’t need to pull your money out before the end of the time you agreed.
9. Educate Yourself on How Money Works
Now more than ever it is crucial to understand how money works. Learning this will help you to reach your financial goals smartly.
To do this well you need to understand how things like interest work, what causes inflation, how to budget effectively, how to manage your spending, and how to grow your money.
I would recommend you increase your knowledge as much as possible. You can read books and get great insights from other people. Books like Rich Dad Poor Dad and The Psychology of Money are great places to start. They are very different but provide great information.
Rich Dad Poor Dad shares what he learned from his rich dad and his poor dad and how this changed the way he saw money. His insights will change the way you think about money.
The Psychology of Money talks about people’s behaviour towards money in the form of short stories. This book is very interesting and has a lot of cautionary tales.
YouTube has a lot of people who are successful and share their journey with money.
Some of the channels I watch are Jennifer Kempson, watching her channel cemented my investing knowledge and gave me the confidence to start investing.
Nischa is another channel I watch. She is a fairly new creator who works in the Accounting field and shares her knowledge.
Earn Your Leisure is another great platform on YouTube, they share their knowledge and also interview people who are considered experts in their fields such as business and investing.
10. Set Goals For Your Finances
Having goals for your finances is super important. It can help to motivate you to work hard and keep going when things get tough.
The goals you set for yourself should be related to your current financial situation. For example, if you have consumer debt your goal could be to pay off your debt in the next 12 months.
I would recommend starting with one goal at a time as you don’t want to be overwhelmed. Once you have decided on your goal you can include it in your budget so you have a plan to tackle it and can hold yourself accountable.
For example, if your goal is to pay off debt you can include the amounts you need to pay each month as part of your expenses in your budget.
11. Know Your Net Worth
Keeping track of your net worth is essential as it will help you to understand your overall financial position.
Your net worth is calculated by subtracting your liabilities from your assets. For example, if you own a property that is valued at $250,000 and you have debts totalling $150,000 your net worth would equal $100,000.
It is important to keep track of this number as you could have more liabilities than assets and not be aware. If you are in a position where you owe more than you own you need to work towards changing this by increasing your assets.
You could do things like create a plan to pay off your debt which will reduce your liabilities or start a side hustle to make more money which will increase your assets.
12. Use Your Credit Card Wisely
If you do have a credit card you need to ensure you use it wisely. Using your credit card in the wrong way can lead to incurring debt.
Before you get a credit card I think it is important that your finances are in a good position. You should be able to pay your bills on time, manage your outgoings, and have an emergency savings fund.
I don’t think it is sensible to use a credit card if you can’t afford the purchase.
I would recommend paying your credit card balance in full each month, this way you won’t incur interest charges or late fees.
Most people say you need a credit card to build credit, but I don’t agree with this entirely. It can help but it isn’t the best way to build credit. Other ways to build credit are simply by paying your bills on time.
13. Stay In Your Financial Lane
You must have heard the saying ‘keeping up with the Joneses’ l am here to tell you don’t do it lol stay in your financial lane.
I know that it is even harder to do that these days with social media and influencers practically everywhere. But you need to resist temptation.
If you see something that you like and you can afford it, then by all means go for it. But if you can’t afford it don’t do it. You don’t need to.
There are ways to afford the things you want or like to do within your budget. You can save up for it or you can find cheaper alternatives.
When you look at rich people like Bill Gates and Warren Buffet, they do not wear their wealth. They dress very conservatively. You don’t see them driving flash cars or wearing expensive jewellery.
These are two of the richest people in the world! They have wealth in excess and they don’t feel the need to show it off.
Now I understand that everyone is different, some people like nice things and are happy to spend a lot of money on material things and that is fine.
All I am saying is that we can learn from how conservative these wealthy people live. Stay in your lane and focus on your own financial goals, this is imperative for success.
14. Become Frugal
Adopting a frugal lifestyle can be very beneficial in helping you to manage your money. Being frugal especially in times like this with the current cost of living crisis is a smart choice.
The definition of frugal in the dictionary is ‘sparing or economical as regards to money or food’. Implementing this lifestyle can help you save more money and also find creative ways to be happy with less. I have a post sharing tips to live frugally, you can read it here.
I have found ways to be frugal without sacrificing quality. For example, if I do want to purchase an item that costs a lot I will wait until it is on sale or check online for discount codes.
You can still maintain your lifestyle while being frugal, you just need to do it in a way that works for you.
15. Track Your Income and Expenses
Tracking your income and expenses is a good habit to adopt as it will highlight your spending habits.
You could be spending an excessive amount of money on socialising and not realise it because you are not tracking your spending. Once you become aware of it you can make improvements.
I believe you should still be able to do the things you enjoy while you work on improving your finances, you just need to do it within a budget.
16. Make Checking Your Finances a Habit
While on your journey to manage your money better, you should be checking in with your finances regularly.
Creating a budget is great, but you need to review it to know if it is working well.
You can make some time at least once a month to review your bank statements, update your budget, and review your overall spending.
17. Be Organised
It is super important to be organised with your finances. This will allow you to plan effectively and pay your bills on time.
Being organised with things like knowing when your bills are due, when your insurance expires, and when any other irregular bills are due will make it easier for you to reach your goals.
You can mark these important dates in your calendar. You can use a manual calendar, Google Calendar, or set reminders on your phone. These dates can also be included in your budget.
18. Always have a Plan
Having a plan can save you from overspending. For example, if you decide to go shopping you should have an idea of the maximum amount you want to spend.
Knowing this beforehand will help you stay within a limit and may encourage you to spend more consciously.
19. Change Your Money Mindset
Changing your mindset towards money is a major key to improving your relationship with money.
This is also important when you are learning to manage your finances better. If you view money in a negative way this will impact the way you feel about money and it may lead to you having a scarcity mindset.
I know this can be hard especially if you are struggling, but it can improve. Don’t view cutting back on your spending as a loss, think about what you will gain in the future if you stick with it.
We should work towards having an abundant mindset. Believe that you can reach your financial goals because you are more than capable.
If you do have a scarcity mindset I would recommend trying to understand why and working towards changing it.
Final Thoughts
Personal finance is personal, it isn’t one size fits all. You need to manage your money in a way that works for you and your needs.
Once you learn how to manage your income and expenses, pay off debt and make saving and investing a priority you will feel secure in your financial position.
This will allow you to start looking at ways to increase your income and work towards financial freedom.
I have shared some tips and the lessons I have learned on my journey with personal finance. I hope you have found them useful and now feel prepared to embark on your journey.
What are your personal finance tips?
This post is all about personal finance tips.
Davina Kelly
Hey! I'm Davina, the owner of Davinas Finance Corner. I'm passionate about finding ways to budget, save, earn more money and improve your life. After breaking free from payday loan debt and living paycheck to paycheck I want to share my experience to help other women improve their finances.