7 Personal Finance Hacks

There’s no easy way to become rich, it’s evident that if you want to improve your financial situation you will have to work hard, but that doesn’t mean that some little effortless tweaks can’t add up and help you a lot. On this post we’ll teach you to beccome an expert in personal money management.

1. Build an Emergency Fund

Accidents are pretty common, there are some types of accidents that can be covered by insurance like a car crash but there are a lot of unpredictable events that can become expensive very fast. It’s important to have some money when these unpredictable events happen, it can be a broken sink or a stolen phone or anything in between. If you don’t have the money for these emergencies you might be forced to use a credit card or borrow with a very high-interest rate.

You should try to avoid these situations by having some money saved, these will stop bad luck from derailing your financial plans. You can start with as low as $100 and move up from there, some recommend that you save your monthly expenses times three in the case you lose your job or something similar.

2. Pay your high interest debt first

This one is a no brainer, nevertheless, there’s a lot of debate about this idea. Dave Ramsey actually argues that you should first pay the smaller debts because of the psychological it will have on you and how it will lead to actually paying your debts. But let’s assume that you’re already financially responsible if that’s the case paying any debt that isn’t the one with the highest interest is just throwing your money away.

You should always focus on eliminating the high-interest debt first because that type of debt is the one that increase your debt amount the most each month. If you ignore high-interest debt with the purpose of paying low-interest debt you might end up increasing your overall debt because the interest generated by the high-interest debt in one year could be larger than the entire low-interest debt amount and leaving a loan with low interests unattended isn’t really that worrysome. So if you have some debt with an interest below 5% pay that at the end. And try pay first credit card debt because they tend to have the highest rates.

3. Use cash whenever you can

Nowadays you can use cards for everything and it makes everything easier, you just need to swipe, you don’t have to go an ATM or worry about no having any cash left. However using cash can have a psychological effect that can lead to more mindful spending.

Actually seeing the money you’re spending will make you realize how much money you’re using which you can totally ignore when just swipping your card. Try to pay with cash whenever you can and you will have a better idea on how much are you spending in different things. Those $4 coffees will probably become less frequent after using this tip.

4. Make Weekly payments to your debt

Making weekly (some recommend bi-weekly payments) payments will lead to paying less interests and on the long run will significantly decrease the amount paid on any given debt amount.

You can just divide your monthly payment by four to find out how much you should pay each week, you can even automate it on your bank account to make things easier. If you’re paying, for example, $600 each month you would have to just pay $150 each week.

5. Pay more than the minimum on your mortage the first years

When it comes to mortgages paying more the first years is one of the best tips you could ever get. On the first years of a mortgage most of the money you’re paying is going to just pay the interests generated, as time continues this interest expense is reduced but if you increase your payments on the first years you can reduce the interest expense very fast and reduce the total amount paid drastically. On average on the first 3 years only 5% of your payment goes towards the principal the other 95% is pure interest expense, which is why you shouldn’t just pay the minimum if you can afford it.

6. Start investing today

Time is your most important ally when it comes to investing, the sooner you start the more time you give your money to grow and when you take the compounding effect into account there’s no reason to delay investing. You might think that starting to invest is expensive and complicated

But it isn’t, you can start today for free on the Robinhood App where there’s no minimum deposit so you can start with whatever money you have right now and continue to make contributions later. Remember that the sooner you start the better. If you don’t know where to start you can check out or Introduction for Beginners or our Top 17 books about Investing.

7. Design a budget that suits you

Budgets are a great idea, they simplify your finances and should lead to a more responsible spending. The problem is that most people can’t stick to budgets. There are many budget plans the most common being the famous “50/30/20” the problem with these arbitrary plans is that they don’t suit your specific need, they don’t fit with your personality. Which is why your budget should be designed based on your life. If you have a lot debt and recently got a job that pays way more than your previous one maybe you can live as you used to till you pay off all your debt and use the entire extra income towards debt. Or maybe you just got a raise and you have a financially stable life then all your raise can go towards investing.

The main concepts you should use are: fixed and variable costs, fixed being stuff that doesn’t change in amount spend every month and that has to be paid like your mortgage, rent, bills etc. and variable costs are stuff where what you spend varies and can be changed for example groceries or money spent going out. You should always put apart the money of your fixed expenses everything else can be changed or tweaked at your will, so design a basic budget with your fixed and variable expenses and improve from there.

If you liked these tips be sure to check our site, we have a lot more content on personal finance, investing and debt you can check out. If you liked this post be sure to share this article.

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