It has often been lamented that the public school system does very little to prepare young adults in the realm of personal finance. Indeed, it is a sad truth that many teens graduate from high school without the first notion of how to properly plan for their financial future. And depending on what advice they receive from their parents and what subjects they might study in post-secondary school, it can conceivably come to that many of these same young adults make it well into their 20s and 30s without the foggiest idea of how to deal with their money.
“Over the last decade or so, I’ve encountered many Millennials and of Generation Z who are lost when it comes to personal finance,” remarks Jason Hare, founder and proprietor of the Kingston, Ontario-area financial firm Cornerstone Wealth. “Many of them have only recently come to the realization that it’s something they should think about. A lot of them are visibly anxious or stressed out about it—and I can understand that. If you’ve made it to full-fledged adulthood without engaging in even the smallest act of financial planning, it can be a daunting prospect.”
While it may seem intimidating at first, the truth is that becoming acquainted with the fundamental principles of personal finance isn’t as tricky as you might think. Grasping the basics requires only a small amount of reading. With that said, the following paragraphs summarize the three core concepts of budgeting, saving, and investing, each accompanied by insights from Certified Financial Planner (CFP) Jason Hare. The intent is to provide a guide, as well as an essential theoretical grounding, for beginners looking to put in place a solid personal financial plan.
Budgeting 2ml2t
Budgeting is the foundation of all personal financial management. It involves taking an inventory of your income and expenses, and then creating a plan for how you will spend and save your money going forward. Start by adding up your unavoidable monthly expenditures, such as rent or mortgage payments, utilities, and debt repayments, and then factor in some money for variable expenses like groceries, transportation, and entertainment. Add up the total, and then compare it to your monthly income. If you’re spending more than you’re earning, it’s time to find some cutbacks. If you’re not, consider saving the extra money. “The goal of budgeting is to live within your means,” explains Jason Hare. “By consistently tracking your expenses and adjusting them as needed, you will have learned what is perhaps the most important skill necessary to gain control over your personal finances. , the math doesn’t lie.”
Saving 3q4ee
Saving is setting aside a portion of your income for future needs and unexpected expenses. It provides a safety net in case of short-term emergencies, and a springboard from which to realize long-term aspirations. Start by establishing an emergency fund with enough money to cover three to six months’ worth of living expenses. It can be helpful to automate this process by setting up regular transfers from your checking to a dedicated savings . “Having enough savings to keep yourself going through a tough period will not only give you peace of mind, it will also prevent you from relying on credit cards during times of crisis. Because of the high interest rates charged by most credit companies, that’s about the worst thing you can do from a financial standpoint,” Hare emphasizes. “Once your emergency fund is established, you can start saving for specific goals like buying a home, travelling, or funding your retirement.”
Investing 1p576e
The final core concept of personal financial planning is investment. Slightly more complex than budgeting or saving, investing involves putting your money into assets with the expectation of generating returns over time. Some of the asset types available include stocks, bonds, mutual funds, and even real estate. Before buying any of these, though, it is important to evaluate your own individual goals, time horizon, and risk tolerance. “When it comes to investing, diversification is the most important principle,” advises Hare. “Spread your investments across different asset classes to reduce your risk. Start early and stay consistent,” Hare recommends. “Even small amounts of money invested regularly can grow significantly over the long term.”
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By mastering the three fundamental principles of budgeting, saving, and investing, anyone can build a solid financial plan and begin working towards ensuring a more secure financial future. However, it must be explicitly stated these are only the broadest and most basic pieces of advice. Taking proactive steps to seek out further education on the subject, such as speaking to knowledgeable friends, relatives, or certified professionals such as Jason Hare, can provide deeper insights and personalized guidance tailored to your own individual financial goals and circumstances.
