13 Personal Finance Tips To Improve Your Finances Long-Term

Shawn Manaher
Shawn Manaher
Updated on October 19, 2022
best personal finance tips

Seeking out some of the best personal finance tips can help you achieve lifelong financial freedom by reducing debt and ensuring you are saving for the future. Whether you want to save for a special goal or you just want to learn to manage your finances better, these 13 tips will show you how to start managing your money. 

Financial experts have discovered that 34% of Americans have zero money in savings. This can lead to financial stress and leave you stranded if you find yourself in an unexpected situation. 

1. Know Your Net Worth 

Some people go through their whole life without knowing their net worth. This can keep you unaware of where you are financially which can cause huge burdens on you and your family. You should never ignore your finances and your net worth. 

To discover your net worth, though, you will need to spend time doing some math. Your net worth is the difference between what you own and what you owe. You will need to make a list of your assets and your liabilities. 

A positive number means you own more than you owe, while a negative number means the opposite. Keep in mind that your net worth depends on your age. If you are just starting your career and are new to investing, negative or low net worth is common. 

As you grow and age, you will want to see your net worth increase. As you move up in your career, you should also see your net worth getting higher. If it’s not, you might be doing something wrong. 

Net worth changes over the course of your life. Any time you acquire new assets or pay off a debt, make sure you are re-calculating your net worth to keep it up to date. 

Consider seeking the advice of a financial investor to see where you can invest more and how you can invest better. 

2. Make a Personal Budget 

Even more important than your net worth is making a personal budget for yourself. Without a budget, you can never keep adequate track of your finances which automatically sets you up for failure. 

You can either create a monthly budget or an annual budget, whichever one works best for you. If you aren’t sure how to make a budget, there are many online tools to help you with personal finance

Budgets are meant to help you plan for the future, reduce unnecessary spending, and save for retirement. It shows you where to prioritize your money. 

The first thing you need to do to make a budget is to project your expenses and income. Make a category of all your monthly spending and how much money you want to allocate to that category. You can either do this old-school with pen and paper or you can get an app to help you. 

Here are some common categories you will want to include in the budget:

  • Bonuses
  • Alimony 
  • Child support
  • Disability benefits 
  • Dividends and interest
  • Royalties and rents 
  • Retirement income 
  • Salaries and wages 
  • Tips 
  • Social security 

These are the main sections you want to put for the income portion of the budget. A thorough budget will also need to include other items like:

  • Childcare 
  • Debt payments 
  • Education 
  • Entertainment 
  • Food 
  • Giving 
  • Housing 
  • Insurance 
  • Medical care 
  • Personal items 
  • Savings 
  • Special occasions 
  • Transportation 
  • Utilities 

3. Manage Your Lifestyle 

You won’t have the same bills and the same income your entire life. You will need to manage your money when big life changes happen. This also applies to lifestyle inflation. Oftentimes, people find that they will spend more money when more money comes along, and they have more to spend. 

You don’t want to spend more money simply because you can. You need to be able to recognize where to save money even if it seems like you are making more than enough to pay all the bills and have more leftover. 

While some increases in spending are normal, make sure you are putting more money towards retirement and the future when you can. You should also spend your extra money where it really matters. This might include paying down debt more than the minimum payment or putting more money towards your children's college tuition. 

As you enter into new phases of life where you are making more money, try and reevaluate your priorities. This includes discussing big changes with your spouse and children when necessary. 

If you are making money at work, chances are you have more work duties that are making your work-life balance harder. You might want to consider spending some of your extra money to get house help so you can spend more time with the family. 

4. Spend Wisely 

One of the best tips when it comes to personal finance is to make sure you are always differentiating between needs and wants. Things you need are everyday items like food, drinks, shelter, and healthcare. Depending on where you live, other things might be considered a need even though to others they are a want. 

For example, if you live in a place where there is no public transportation and you work across town, a car is a need. In other cities where there is a good bus and metro system, you will be able to get around without a car even though it might be more convenient than using the metro system. 

If you decide that a car is a need, you should consider getting one that is used and costs less before you go to a dealership and get one that requires a high monthly payment. 

Even if you need bigger items, there are ways you can get them on a budget. If you are spending wisely and staying within the budget, it’s easier to start saving for the future. 

Also keep in mind that even if you have leftover money at the end of the month, you do not need to spend it all. You can save it for emergencies or put it towards the next month in the event that you come up short. 

5. Start A Savings Account Early 

It’s never too early to begin saving. The sooner you begin saving, the less pressure there is for the future. If you start saving too late in life, you will find that you are having a hard time meeting goals for retirement and other long-term things. 

The easiest way to start saving for the future is to use the power of compounding. This means you are reinvesting the earnings you have. Many people start retirement accounts where you can put money in them every month and earn interest on it. 

This allows you to put money towards the future and gain more as the interest will be compounded monthly or quarterly. 

Having a savings account lets you prepare for the future and have emergency funds should you need them. 

This allows you to save more money without putting in more money. If you have an account that does not have interest, you will have to put in more money. You should also take advantage of your employer’s 401k since whatever you contribute, most employers will match. 

You can also open investment accounts and start earning interest on the money you put in them. If you’re a first-time investor, you might want to seek advice on where to best put your resources. 

6. Have an Emergency Fund 

You never know when emergencies will come up in life. You hope they never happen, but sometimes unexpected things happen in life. The point of an emergency fund is to put money away for things that are not included in the typical budget. This includes things like unexpected medical bills or car repairs. 

Most financial experts recommend that you try and save about 3 to 6 months' worth of income into the emergency fund. However, this might still not be enough to cover emergency surgery or needing a new car. 

So, you need to make sure you are saving at least 6 months and more if possible. This emergency fund will also help you cover living expenses in the event that you cannot work for some unforeseen reason. 

Try to start your emergency fund as soon as possible. Even if you are only making a little money, try and put money aside every month even if it’s only a few dollars. It can grow quicker than you think. 

Even if you come up short when there is an emergency, you should be proud that you were able to put money away in the first place. 

7. Educate Yourself on Personal Finance 

There are tons of resources both online and in books where you can learn about personal finance. Keep in mind though, that not all resources are equal. Make sure you are using trusted resources only or you might end up getting bad advice. 

Other resources might just be poorly informed. So, they might think they are giving good advice when they are actually telling people things that could negatively affect them. 

You should also be careful when taking advice from friends and relatives. What worked for them might not be the best for everyone. They might push you to do things too soon like buying a home or getting a new car. These things might work for some people but might not be the best choice for you if it involves taking on large amounts of debt that you might have a hard time repaying. 

Before reading any books or listening to online resources, make sure it’s from a qualified person. Read about their credentials and see if they have degrees or experience in the topic of finance. 

8. Be Prepared for Taxes 

Some people learn to budget and save money, but they forget about preparing themselves for taxes. Discovering that you owe more in taxes than you anticipated can make your life much harder than it needs to be. 

You also need to make sure you are working with a budget with the salary you make after taxes. Using your salary before taxes can be misleading and can cause you to think you have more money than you actually do. 

So, make sure you know your gross pay and then make the necessary deductions to prepare for taxes. Then, you can use your net pay when making your budget. You also need to consider where you live when it comes to taxes. Each state will require you to pay federal taxes while other states make you pay a state income tax as well. 

Unless you have a difficult tax situation, you can learn how much you are paying in taxes on your own. There are many free tools online and free software that you can use. If you are confused or have an abnormal tax situation, you can hire a financial advisor to help you. 

9. Pay for Insurance 

Many people put the monthly costs of health insurance on the back burner. They think they are young and healthy, so they don’t need to put aside money for health insurance. However, even a minor injury can end up putting you out thousands of dollars. This is why you need to get insurance especially if you are completely uninsured and your job does not offer adequate insurance. 

If you need to buy insurance for yourself, consider looking at the Affordable Care Act or the Health Insurance Marketplace. You should be able to see different quotes from all the providers that are available to you. 

Keep in mind if you already have health issues, you will need to pay more in insurance than others who do not have pre-existing conditions. If you’re under the age of 26, you might be able to be on your parent's insurance if they have a plan that includes dependents. 

You can also make sure your health is an investment. Take care of your body by exercising, limiting alcohol, and eating healthily. This can prevent you from developing health conditions that will raise premiums. 

10. Start Protecting Your Wealth 

One of the biggest mistakes people make is not protecting their wealth. They come into money and then do not take the necessary steps to make sure their money and assets are well protected. While you might not be able to afford all the best ways to protect your money, you can try a few. 

Consider getting renter’s insurance if you are renting an apartment or a home. This makes sure in the case of a robbery or flood; your things are protected. All policies are different though, so make sure you read the terms and conditions. 

You should also invest in disability insurance. This gives you a steady income in the event that you become injured and are not able to work. You will be able to live comfortably while you heal before you can go back to work. This also protects your spouse and children as they will still be able to have everything they need if the primary income earner suddenly cannot work. 

You should also make sure your money is protected from inflation by allowing all your accounts to earn interest. This includes all savings accounts and retirement accounts. You can put money in high-interest savings accounts and money market funds. 

If you are willing to take some financial risks, you can always invest and get stocks. Just make sure you speak to a financial advisor before doing so. 

11. Talk to Friends and Families 

While you should always seek advice from financial planners and experts, you might also want to speak with friends and family before making any big financial decisions. Friends and family know you better than random financial planners. They might be able to help guide you. 

Relatives can also give you advice based on what worked for them. The same ideas don’t work for everyone, but they might be able to give you some inspiration on the ways they saved money and the accounts they used. 

If you have someone in the family who is an investor, they can also give you advice on the stock market or help you make good investment decisions to benefit you in the future. 

If you feel like they are giving you ideas that can work for you, you can take the next steps. Any advice that does not benefit you, you can ignore. If you are not sure, always seek the advice of a professional. 

12. Don’t Compare Yourself to Others 

One of the biggest mistakes you can make when it comes to making long-term financial decisions is comparing yourself to others. You might see friends getting large homes and buying new cars and be misled, thinking you need to do the same. 

If you are not financially ready to get a mortgage and an auto loan, you should take a step back and ask yourself what you can afford now. It might mean living for a few years in a less desirable home or a smaller home. However, you will be able to save more money every month compared to your peers and family members. 

Once you have enough money to put a down payment on a home and have a lower mortgage payment, you will be proud that you didn’t follow the trends of everyone else. 

You also shouldn’t allow other people to pressure you into big financial decisions. You might have relatives telling you that you’re getting older, so you need to commit to a house and get a mortgage. If this makes you uncomfortable, tell them so and make the right decisions for yourself. 

You always have time to make big financial decisions, and you shouldn’t feel the burden of others trying to make them for you. 

13. Try to Reduce Monthly Bills 

One of the biggest tips for saving money is to reduce monthly bills. However, this might not be possible in all areas of life. Depending on where you live, your rent and electric bills might be the lowest they can go. 

However, consider other areas where you can cut down. You might be able to cancel your cable bill or put yourself on a limited data plan if you don’t use the internet very often. You can also reduce your monthly eating-out bills by cooking more at home. 

You can also consider how much you spend monthly on entertainment. Leaving the house to see friends and have fun is a must, but you may need to do it less often. Alternatively, you can invite friends over to the house and spend time at home rather than going out and spending money. 

You can also meal prep and plan a monthly food menu instead of eating out or roaming the grocery store aimlessly. This might not save you much money at the beginning, but you will be surprised where you can put that extra money to start saving for the future. 

Conclusion 

These 13 tips can have a life-changing effect on your finances and future. If you aren’t ready to implement all at one time, that’s normal. Just start small and grow gradually. If you aren’t sure where to start, talk to a financial advisor or a trusted relative with financial experience. 

Following these best personal finance tips can make your life easier. Building wealth and saving for the future takes discipline and practice but is worth all the hard work. 

Shawn Manaher

Shawn Manaher

Shawn Manaher is a former financial advisor, has founded 5 online businesses, and is a coach, speaker, podcast host, and author.

He's been featured on Forbes, The Consults Corner on TAE Radio, The Writing Biz, What's Your Story, and more.

He loves to share his personal finance tips and money management wisdom with others to help them find financial freedom.
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