By: Select Preferred Network
The Fastest Ways To Learn About Personal Finance
Learning about personal finance is most important for surviving in the current US economy. You need to learn how to create a budget and understand expenses to become self-sufficient with your money. Moreover, if you plan on retiring later in life, you also need to learn how to invest in the stock market. Having investment skills will contribute to making you financially independent.
The Best Ways to Learn About Personal Finance
Managing personal finances is important for everyone. However, before we explore this topic, you should understand the two fundamentals of finance – assets and liabilities.
Assets are the things you own, like cash, land, machinery, or anything that can generate wealth for you. On the other hand, liabilities are financial responsibilities or amounts you have to pay to those you owe money. Your liabilities can include loans, mortgages, and other financial payments you need to make. Now, let’s see how you can use these two principles of finance and learn money management.
1. Know Your Net Worth
The first step to personal finance is to know your net worth. Net worth can be calculated by subtracting your assets from liabilities. The result shows either a deficit (negative amount) or a positive value. If you are in the positive bracket, it means you have enough assets to support your loans. However, a negative outcome is something to worry about.
2. Create a Budget
Now that you know your net worth, it’s time to create a budget. A budget is made month-wise; it’s the amount you will spend on your necessities and wants. However, the most important aspect of making a budget is to take out your liabilities and savings from your income. After this step, you can distribute the remaining money weekly and add it up to make a monthly budget.
3. Create Financial Goals
After making a budget and taking out your savings per month, create a financial goal. A financial goal is an amount you plan to achieve within a year. So, you need to control your extra expense to reach your target. Without a financial goal, you won’t be able to save enough money for an emergency fund. The best way to make a financial goal is to multiply your monthly savings by 12 and then divide it by 20%. The 20% will be the amount you pay for unexpected financial blowouts.
The information mentioned above is sufficient to help you get started. However, once you reach your financial goal by the end of a year, take out 20% of that money and invest it in the stock market or real estate. This way, you will acquire more assets every year, leading to a financially secure life!