Personal finance is a topic that many people don’t know much about. The truth is, personal finance is something everyone should be educated about because it impacts every aspect of your life. This article will cover 12 facts that you may not have learned in school but should know. They will help you succeed financially and live the best possible life.
Fact #1: The Average Person Spends 12-18% More When Using Credit Cards
People spend 12-18% more when using credit cards than when paying cash. This is because people feel like it’s “free money” and don’t think about what they’re spending.
If you want to avoid overspending, always carry cash or a digital wallet with you so that if an impulse purchase pops up, you can take care of business by paying in cash.
Fact #2: Do You Know What Interest Rate You’re Paying?
Over 50% of millennials don’t know what interest rate they’re paying on their credit cards and interest rates can vary greatly from bank to bank.
The truth is that when you’re not paying attention, your credit card company might be charging up to 29% on an annual basis for a balance. If you want to avoid this, do some research on what rate banks are offering before applying – it could save you thousands.
Fact #3: 33% Of College Students Have Made a Late Payment on a Credit Card
Making a late payment is never fun, but 33% of college students have done it. The truth is that if you find yourself in this situation and don’t want to pay the fee for being late, there are other options available like making an online payment on your bank’s website or setting up automatic payments with your credit card company.
Fact #4: Paying the Minimum Required Balance Will Get You Nowhere
You might think that paying the minimum required balance on your credit card bill every month is doing you some good.
But in reality, it’s only going to make things worse. Minimum payments barely cover the interest rate1 charged, and by not making a higher payment each month, you’re never going to get out of debt.
Fact #5: Track Your Credit Score to Make Sure It’s Good
Your credit score2 is one of the most critical aspects of your personal finance life.
If you want to make sure that it stays good, track it every so often and know how much you can afford before applying for a loan or trying to rent an apartment – this way, there will be no surprises.
Fact #6: Stocks Provide a 10% Rate of Return Over Time
If you’re looking for a good investment, stocks might be the way to go.
People tend to talk about how high risk they are and that they can’t afford “to lose their money,” but stocks provide rates of returns at around 10% over time. There are few other investments with a similar pace.
Fact #7: Debt Isn’t Inherently Bad
Debt isn’t always bad but it depends on how you use it. If you put your money in a high-interest savings account, then the debt may be worth the risk because of all the interest earned over time.
However, if you borrow to buy something that depreciates quickly and is hard to sell (like art or jewellery), then there’s no question about whether or not borrowing is wise.
Fact #8: Do You Know the “Rule of 72”?
The “rule of 72” is vital, it can help determine how long it will take for you to double your initial investment. It’s not hard to calculate – divide the number 72 by the rate at which your money grows (which should correspond with compound interest), and you’ll know how much your investment will grow over time.
Fact #9: Budgeting Is Crucial for Your Financial Success
We all know that a budget can be hard to stick to when times get tough, but the truth is that if you don’t have a plan in place for how much money your’e spending each month and where it should go, then there your’e likely to overspend. Budgeting also helps make sure that you’re not living paycheck to paycheck.
Fact #10: Wealth Doesn’t Equate a Huge Salary
Some people accumulate wealth by owning their own home, living below their means, and saving as much money as possible – all without making six-figure salaries.
Fact #11: Saving Isn’t Investing
We’ve all heard that “saving is good” but if you’re not investing, then you’re missing an opportunity to grow your money.
Saving can help build your emergency fund and give you a cushion if something happens (like losing your job), but investing will help your money grow. Don’t be too discouraged if you don’t have investments just adjust your plan and have both.
Fact #12: Direct Deposits Can Save You Money
If you’re getting paid every two weeks, there’s no need to go into the bank every time or even wait until your bi-weekly paycheck is deposited – sign up for a direct deposit and let everything happen on its own.
What Are the Benefits of Personal Finance?
There are many benefits to sound personal finance. For one, it’s a great way of teaching yourself essential life skills like saving money and managing your expenses.
It also keeps you out of debt so that there is less stress on the household budget, and you pay off debts sooner than expected.
What Is Personal Finance?
Personal finance can be defined as the act of managing your money and finances. This means that you are deciding where to put your money to grow into something useful later on down the line.
Why Do We Need Personal Finance?
Personal Finance is necessary for some basic needs of human life such as food, healthcare, and shelter.
It’s an investment in the future that pays off many times over during your lifetime and after you die with bequests to heirs or charity beneficiaries.
What Are the Most Important Aspects of Personal Finance for People to Learn?
The most important aspect of personal finance is budgeting, saving, and investing.
Many people will say that personal finance is difficult to grasp. But the truth is, it doesn’t have to be. The more tips and tricks you learn about to make you money go further the easier it becomes to understand and take action in improving your finances.