In this blog post I will explain How Can A Personal Finance Crisis Be Avoided. Yes this may sound like common sense, but this post is for the beginners or the ones that really want an answer to this question. I hope you find something useful in this blog post and share it with someone that needs to read this.
Everything in this post is based on only opinion
There is only a few steps that you really need to do in order to avoid a financial crisis and the first one is budgeting. Let’s say that you are making $200 every two weeks from being part time and going to school. For your first couple paychecks I highly suggest that you put $80 in checking and $120 in savings. You will then now need to learn how to live off $80 for the next 2 weeks which basically means using that money in checking for gas. When the next paycheck comes around you will probably have $40 left in checking (this all just depends how much you spend on gas) but that $120 will still be there. Now you have $240 in savings and $120 in checking. This will start to build a habit and you’ll be able to avoid worrying about the next check.
If you are someone that is full time and making way more than $200 then the above example should still apply. You have to get into a habit of living below you needs. Don’t know what that means? In a day think of everything that you THINK you need and then ask yourself “Can I survive a day without it?” If that doesn’t help then download an app like Mint or record everything that you spend in a day and analyze it. You’ll be surprised what you can cut out and save that money for something else.
To summarize, Live below your needs until you build enough savings and not have to fall into living paycheck to paycheck
Yes I am only going to keep it to just 2 steps. When it comes to investing, you can start taking money from your savings account and putting it into the stock market or opening a high interest savings account. The reason you want to do this is because your regular savings account is only going to give you pennies for keeping money with them. Head over to Bankrate and you can do some calculations to see the interest you can possibly earn.
It’s good to invest in dividend stocks that payout money every month/quarter or ETF’s that slowly grow overtime. If you don’t feel like doing your own research on what stock to buy then use Acorns. The money you invest will be split into fractional shares and then invested based on how you want your portfolio to be. If you want to buy stocks on your own then Robinhood will be the way to go.
Below is a video that will further help you with which app to invest with
3) Avoiding Credit Card Debt
Credit card debt is the last thing that must be avoid at all cost. When you buy something and put it on a credit card make sure to pay it off fast. Yeah you can do the minimum payment the first month but it should be paid off the next month. The reason for this is because you will forget by mistake and interest will come knocking.
I think that it’s good to have a credit card and build credit, but make sure that what you buy is small purchases. You can read countless stories about people that have amassed huge amounts of debt and the main problem is no one thinks about the interest.
This post is more of a quick guide to answer the question How Can A Personal Finance Crisis Be Avoided. I am trying to get straight to the point and not add a bunch of filler sentences to make my post longer. Send this to someone that needs to learn about personal finance. read other post that I wrote below..