Learning financial savvy can take a while, but the basics are fairly simple andnever change.
Heres where to get started.
Put another way, yourmindset matters just as much as the math.
The biggerthe gap between your income and your spending, the better.
Always plan for the future:This doesnt just mean retirement.
Establishing an emergency fund will allow you to deal with unexpected car repairs or medical bills.
Having a retirement plan will ensure you have income when youre unable to work anymore.
Your finances should always look forward beyond the current month.
Make your money make more money:Want to know how the rich keep getting richer?
Its because money can grow while you sleep, provided you save some of it.
Properly invested moneyearns more money over time.
Dont just sock all your cash away in a low-interest savings account.
Invest in things that will earn you more money than you had before.
The most importantpersonal finance rules dont change.
What your grandparents did may not work for you.
There will always be newer, better tools to manage your money.
However, spending less than you earn will always be beneficial.
Investing your money will always be better than doing nothing with it.
And planning for the future will always be better than blowing your paycheck as soon as you get it.
Youll need some kind of account to stash your spending money and short-term savings.
Setting up a bank account is easy.
Picking a bank means finding an institution that has the services you need with the fewest fees.
Weve discussed to look for in a bank here.
Chances are, most adults in your life have recommendations on which bank they prefer.
The site can find branch locations near you, and give you links to the companys websites where available.
NerdWallet also has agreat online tool herethat compares checking accounts from a variety of banks.
Of course, keep in mind that not every bank has physical branches.
Some bankslike Simple,Ally, orCapital One 360are online-only.
it’s possible for you to check with the bank you want for specifics.
If youre still not sure which bank to go with, dont worry too much.
When youre young and your career is new, youdont have a lot of money.
Start by calculating how much money you make in a month.
If you get paid hourly, multiply your wage by the typical number of hours you work each month.
Then, write down all of your regular expenses.
This includes recurring costs like your rent or mortgage, utilities, car payments, and and so on.
For more complex things like food, you may need to track what you spend over time.
If you cant get a precise number, estimate in the meantime.
Then, keep track of all your expenses for the next month or two.
At the end of each month, add everything up to see how much youre spending in each category.
Ideally, the amount you spend in a month should be lower than the amount you earn.
If you have to, cut ruthlessly.
you’re able to read more about how to use Mintwith our beginners guide.
So youve gotten into the habit of tracking your spending, and now its time to create that budget.
There are a few different philosophies here.
Others,like financial expert Ramit Sethi, believe that being overly strict doesnt work.
Savings (5-10%):Short- and long-term savings should go in this category.
This includes saving up for vacations, gifts, or large purchases like a new TV or computer.
(Well talk about this more in a bit.)
Ultimately, budgeting just means knowing where your money is going and planning ahead.
The only thing you gotta decide ishow muchyoull place in each category.
Weve included Sethis recommended percentages as a guide, but you’re able to adjust as needed.
The more you could save, the better!
Theres no shortage of personal finance tools to help you manage your budget.
This kind of debt can put you in a hole thats hard to climb out of.
However, credit cards can also be really usefulwhen used correctly.
Heres the short version:dont use a credit card to buy things you couldnt otherwise afford.
If thats all you take away from this section, youre already ahead of most people.
In fact, they may even give yourewards for doing so.
If youdontpay it back, the credit card company will start charging you extra money known as interest.
Each month, the company will charge you the previous months interest on whatever balance youre carrying.
If you only pay the minimum amount due, most of your payment will go towards interest.
This means your balance will remain high, and keep generating interest.
However, with a disciplined budget, its basically like getting free money for going about your daily life.
Your credit card may have a ton of benefits that arent immediately obvious, so check your contract.
Try not to think of them like extra cash.
Having a $1,000 credit limit doesnt mean you have $1,000 to spend.
It means you canborrow$1,000 for a month.
If you could learn to use credit cards responsibly, they can be immensely useful.
Banks typically dont like doling out money without some kind of assurance theyll be paid back.
So, various financial companies created whats called a credit score.
In other words, your credit score can have a profound impact on your life.
You dont just have one credit score, either.
There are three major nationwide credit agencies that are typically used to gauge your credit.
However, you shouldnt ever need topay anything to monitor your credit score.
Credit reporting agencies will grade you a variety of factors.
The longer you go without paying at least the minimum due, the worse it gets.
This is the second biggest factor in determining your credit score.
An ideal number is around 30% of your total available credit.
You dont want it to be zero, because then youre not building credit at all.
However, the farther past 30% you get, the more the agency sees you as a risk.
Length of credit history:The longer you have lines of credit open, the better for your score.
If youve paid a credit card off, dont close it out.
Useat least one recurring chargeto keep it active, and pay it off every month.
Types of credit:The mix of credit accounts you have can also benefit your score.
However, there is an exception.
Life changes often require multiple credit checks, so thats taken into account.
Just dont make a run at open three credit cards in a year.
If you handle your finances well, you usually shouldnt have to do much to manage your credit score.
Much like indoor plumbing, it usually only becomes a headache when something goes wrong.
Maybe it took you a couple months, but youre finally in control of your finances.
Now comes the next part: saving for the future.
If youre anythinglike I used to be, you probably havent thought much about the future.
Maybe it seems too far away to matter, or maybe it feels impossible and overwhelming.
To start with, you remember those sections in your budget that you made earlier called Savings and Investments?
Start by savingsaving those automatically.
The money you never have access to is the easiest to save.
But your real, long-term savings are going toward something far more important: retirement.
Thats where investments come in.
This is how you save enough to retire one day.
Investing doesnt have to be complicated, eitherit doesnt mean picking winning stocks or timing the market.
It will then automatically pick which companies or industries to invest in.
If you want to get more hands on, we detail more tools formanaging your investments here.
Long-term investments can also come from your employer.
This is whats called lifestyle inflation.
Investing is an overwhelming area of finance, so start small and learn what you might.
Photos bySam Howzit,frankieleon, andAAG.com.
