4 Personal Finance Tricks For Non-Experts

Written by on January 8, 2013 in Money - No comments | Print this page

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There is a lot of financial advice floating around, and some of it can help you gain financial freedom. Most of the advice is cliché, and you may not understand how to put the advice into meaningful action. When you know how to take the advice and put it to work in your own life, you will soon find yourself in charge of your finances and moving in the right direction. Here are four personal finance tips to help non-experts succeed.

Pay Yourself First

Responsible people make paying their bills a top priority, but it’s not enough to just keep the bills paid. Without savings in place, the funds are not available to deal with emergencies or make investments. That’s why the first financial trick is to make paying yourself a priority. Take between 10 and 30 percent of every paycheck and put it in the savings account.

This creates an emergency fund that helps you avoid charging, and you will have the money on hand to take advantage of opportunities and smart investments. It will mean that you cannot buy everything you want in the short-term, but the long-term rewards are worth the initial sacrifices.


Fear and Greed Translate to Market Lows and Highs

Everyone knows that you should buy when the markets are low and sell when they are high. It’s Finance101, but it’s hard to know where those points are. Emotions like greed and fear get in the way, but you can use those basic emotions to understand what steps you should take.

When the market drops, it’s because people are afraid of what the future holds. They are anxious to liquidate holdings, and that drives the prices down. A culture of fear permeates the air, but this is the still the time to buy. As the prices rise, investors are confident.

They see the rising tide and want to be part of it, so they hold onto their investments for a few days more in the hopes of fetching higher prices. These periods are marked by greed and excitement, and they signal the right time to sell. Don’t fall for the traps of letting fear make you sell and allowing greed to make you buy.

Understand the Difference Between Good Debt and Bad Debt

Everyone has debt. The question is whether the debt is making money or costing them money. Credit card debt steals wealth every month through interest charges. Financing investment property that will produce rental income is good debt that provides a steady source of income.

It’s also important to remember that banks want you to have a stake in any investment venture. Credit card companies give cards away because they want the interest income and purchase fees generated by charging. However, they will only provide loans for investments if borrowers are able to make a solid contribution of 20 percent or more. People who have been paying themselves first and following the rule of selling high and buying low will have the necessary funds on hand.

The Tortoise and the Hare

The experts know that get-rich-quick schemes never work. People who have built wealth know that it is a slow process, but you will win every time if you take it slow and steady. Remember that it’s not about showing off and impressing other people. Making decisions based on what other people will think or in an attempt to impress them will result in the loss of your own wealth.

Consistency is the most important rule. If you consistently charge purchases and pay the minimum, you will forever owe the credit card company. However, consistently paying yourself first and making smart financial choices will lead you to financial freedom.

These tips are tried and true. Advice followed by self-made millionaires, anyone can use them to expand wealth and take control of their finances. Sacrifices may have to be made in the early years as habits are changed, but the long-term reward will be well worth the early inconvenience.

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This is a guest post.  Doug Duncan is a finance manager and guest author at Best Finance Schools, where he contributed to the guide to the Top 10 Best Online Master’s in Finance Degree Program.

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