Personal Finance 101: The Beginner’s Guide to Personal Finance

1. Learn To Live Within Your Means

Research shows that the hardest part about reaching any goal is getting started. Saving money is no different. Most of us talk about wanting to save and what we would do with the money. But then we kick the can down the road and put off getting started until we “make more money”.

Most of the people who talk about personal finance tell us that they don’t know where to start. They have a job but are living paycheck to paycheck. We’ve been there too. For years. But you have to start somewhere. Saving just $10 a week will help you save over $500 in your first year.

Reading the Beginner’s Guide to Personal Finance is a good start! However, the first real step is to create a budget. A budget is a plan for how much money you will spend over a given period of time. We recommend starting by breaking it down by month. If you make $2,000 a month, then your budget must account for how every single one of those dollars will be spent or saved.

The easiest and best way to save is going to be by spending less money every month.

Set a realistic goal and slowly prove to yourself that you can save. In order to cut your living expenses we recommend focusing on housing first. Living with roommates, or even better, at home with your parents for a few years is a GREAT move.

We realized that we were spending too much money eating out every week so we began to cook more meals at home. Other items that you might be paying too much money for are monthly cell phone bills, cable bills, and car payments.

If you think you are already spending the bare minimum, you probably aren’t. If you still can’t find anything to cut, then you need to find a way to make extra money (ie. drive Uber/Lyft on nights and weekends).

Don’t move onto step 2 of the Beginner’s Guide to Personal Finance until you have saved up and put away $1,000 extra dollars. If your savings drop below $1,000 you need to return to step 1.

2. Contribute Enough To Earn The Full Employer Match

Whether it took you 1 month or 2 years to get here, you should be very proud of yourself! Step 1 is the hardest! The next step is to max out any employer sponsored matching program, like a 401(k) with a match. This is one of the few things in the Beginner’s Guide to Personal Finance that you should commit to memory!

Some companies offer an incredible perk to their employees in the form of employer sponsored retirement plans WITH matching contributions. What this means is that the company you work for will put money directly into your retirement account to match or partially match the amount you put in (up to a certain amount).

This is free money that you can ONLY get by also putting money into the retirement account.

Not maxing out this matching contribution doesn’t make sense. It is exactly the same as walking past a $10 bill on the ground and not stopping to pick it up. Don’t be a dummy. Pick up the money.

If your employer offers a sponsored retirement program like a 401(k) without a matching component, or if they don’t offer a retirement savings program at all, then you should skip this step. If they do offer it, fund only the dollar amount to get the full company match. Work with your company to calculate exactly how much you should contribute every month to max out their matching contribution.

3. Pay Down Your High Interest

For example, if your car gets a flat tire, it will be hard to drive to work. The fund also limits the financial damage that can occur if your bills cannot get paid on time. We recommend that you save enough money to cover 3 months of your basic living expenses.

This money can be saved in cash in a safe place at home, but we recommend keeping it in a free online no-fee checking or savings account so that it can’t get stolen, lost, or destroyed. We recommend that you read our detailed post about emergency funds to learn more!