The Financed Life
A Guide to Personal Finance
I feel more often than not, people feel confused when it comes to trying to understand the world of finance. Many times we simply didn't learn until later and what we did learn was basic credit card or tax information. From a young age I had seen the importance of money but I was unsure of how to learn more all I had known was the importance of savings. As I got older I began to learn more though online research and conversations with people experienced in what I wanted to learn. What I had noticed was two thing. The first was how important it was to learn personal finance the second was how many people who wanted to know but didn't know where to begin. I decided I wanted to create a guide for those who wanted to learn more about personal finance something that could summarize the basics of what they wanted to know. Combining the knowledge I had learned with the knowledge of others to create a path for those wanting to improve their own financial literacy. I hope that this guide is able to assist you in learning more about the world of personal finance and improves your way of life both financially and personally
The Importance of Personal Finance
Money is often viewed as unnecessary for happiness. The idea being told in the notable phrase "Money can't buy happiness" to which I personally disagree. While the pursuit of money may not always bring you joy having money brings the joy of not having to worry
Neal Gabler a writer for The Atlantic wrote an article on the lack of financial security middle class Americans had. In the article he discusses his own financial issues as well as studies conducted by economists.
What he found was Americans are grossly unprepared for a basic financial emergency. Below are quotes from the article which show the studies and research that was conducted. I've also included a brief summary alongside each quote
Link to the article:
https://www.theatlantic.com/magazine/archive/2016/05/my-secret-shame/476415/
“Economists have long theorized that people smooth their consumption over their lifetime, offsetting bad years with good ones—borrowing in the bad, saving in the good. But recent research indicates that when people get some money—a bonus, a tax refund, a small inheritance—they are, in fact, more likely to spend it than to save it. “It could be,” Johnson says, “that people don’t have the money” to save”
“The Bankrate survey reported that nearly half of college graduates would not cover that car repair or emergency-room visit through savings, and the study by Lusardi, Tufano, and Schneider found that nearly one-quarter of households making $100,000 to $150,000 a year claim not to be able to raise $2,000 in a month”
“According to an analysis of Federal Reserve and TransUnion data by the personal-finance site ValuePenguin, credit-card debt stood at about $5,700 per household in 2015. Of course, this figure factors in all the households with a balance of zero. About 38 percent of households carried some debt, according to the analysis, and among those, the average was more than $15,000.
In a 2010 report titled “Middle Class in America,” the U.S. Commerce Department defined that class less by its position on the economic scale than by its aspirations: homeownership, a car for each adult, health security, a college education for each child, retirement security, and a family vacation each year.
From this we learn that many Americans struggle with their finances of the point that when they are given a surplus of money they will spend it on neccessities rather than be able to save it
The issue does not only affect low income Americans. Nearly 1/4 of households making 100k-150k a year claim they could not raise $2,000 in one month.
The average credit card debt per household is $5700 as of 2015 even after taking into account those with no debt
This has become an difficult goal for many that it has become a dream to reach that level of finaical secuity
Its the financial issues pressing Americans and the dream of financial security that makes more important than ever before to learn more about personal finances
How To SPEND
With many financial advice focusing on how to save money I wanted to take an alternate route to learning good spending habits and tools to help. In this section we will be going over
- Credit Cards (Why having a high credit score is good and how to get one)
- Spending Mentality (How to have a healthy spending mentality)
- Budgeting (Why it is important to budget)
Credit Cards
Credit cards can be a powerful tool to get closer to financial stability. However if used improperly can result in thousands of dollars in debt. This section will help you understand how to use credit cards in the most efficient way
Credit Scores and Better Cards
Credit scores are essentially a rating that is given to the holder of the card. It should be the goal of the owner to obtain and keep a high score, as a high score gives benefits such as
​
Whether its a auto loan, mortgage, or business loan having a higher credit score shows to lenders you can be responsible with your money. This will lead yo you receiving lower interest rates meaning you can decrease the additional cost that comes with a high interest loan
​
With a higher credit score you can apply for better credit cards. These cards can have lower interest rates, higher cashback options, even rewards when you spend money such as airline miles
​
Higher credit scores can land you better apartments, lower insurance rates for your car and generally help your personal finance
What to Do and Avoid with Credit Cards
Do
​
- Pay your credit card on time
​
​
Avoid
​
- Neglecting to pay your credit card on time
And that's it! Yes there are many other ways to raise your score that can be found here. But paying your credit card on time and in full consistanly is arguable the number one way to raise your score.
Sounds Easy Enough? For Many its Difficult
37% of U.S households were found to hold month to month credit card debt. (Source)
The average amount of debt per U.S household was over $7000. The total amount of debt overall is 466 billion (Source)
​
​
​
Credit card debt affects millions of Americans and can be detrimental to your finances. To navigate credit cards always remember
Pay your credit cards on time and in full
​
​
​