How to Improve Personal Finance Skills

How you understand personal finance mostly depends on how you were brought up. That’s according to Robert Kiyosaki’s Rich Dad, Poor Dad book. Robert insinuates that the money environment you grow in impacts how you handle money in the future.

As much as Robert’s idea is a fact, we still have Napoleon Hill’s Think and Grow Rich book, where he says that gaining wealth depends much on how you think. According to Hill, it’s possible to think of an idea, nature it, and eventually grow rich. 

With either of the two ideas of Kiyosaki and Hill, you will still need to have quality finance skills to help you out. The good thing is that you can learn how to improve your financial skills. However, practising this particular skill is what makes your money management exceptional.

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What is Personal Finance?

Personal finance is a general term that entails making, saving, investing, and planning your money. Excellent management of your finance starts when you first learn how to make money. Otherwise, you can’t plan for finances that you don’t have. 

Once you learn the different ways of making money, you can now start saving or investing in different businesses. However, according to Kiyosaki, you must first overcome a negative attitude towards money if you want to prosper in making and managing money.

For instance, in his book, Kiyosaki says that you need to have a positive attitude towards making money and managing it. If you have a negative attitude like spending all you have until you get into debt, you have a lot to overcome.

Keep reading, and I will show you how you can embrace both Kiyosaki’s and Hill’s ideas about wealth. You will learn how to make and manage your money through the personal finance skills you will adopt here.

So,

How Do You Improve Personal Finance Skills?

Understand your needs and wants

Needs and wants are two different words with different meanings. A need is the basic requirements in life, like food, shelter, and clothing. On the other hand, a want is a requirement you wish to have, but you can still survive without it.

Of course, to succeed in managing your money, you will have to learn how to differentiate the two. For instance, there is a time in life when you will only focus on your needs to survive. Have you ever heard about the great depression experienced between 1929 to 1939? People were queuing for basic needs like food when the worldwide economy was down.

Well, I think the Coronavirus pandemic and the Russian-Ukrainian war have somehow led to some economic meltdown. So, we live in moments where millions of people struggle to survive, hence focusing on their needs alone.

As per the Rich Dad Poor Dad book by Kiyosaki, rich dads teach their children to balance their needs and wants. It’s rare to find them yearning for needs; they only struggle for wants.

Develop and maintain a budget

In making a budget, this is where many people make it wrong. You have to understand the needs and wants before structuring a retainable budget. 

Of course, you will have to prioritise your needs to have more energy while working to meet your wants. 

Here is what you can factor in while creating a budget:

  • Calculate your net income after all the deductions
  • Track your spending habits; this will help you adjust to remove some wants from your budget
  • The next thing is you should set achievable goals. Consider following the SMART goal setting rule.
  • Always review your budget to ensure you are on your toes

A clear budget will help you develop essential discipline, a critical factor in achieving your personal finance goals.

Start an Investment Strategy

Napoleon Hill, in his book, Think and Grow Rich, says that everything you see around starts from a single idea. He has talked about the founding of different things like vehicles, aeroplanes and other things.

Every investment plan starts with an idea. Even the tallest storey building you’ve ever seen or heard started from someone’s subconscious mind.

Therefore, if you want to make sound and effective investments, you will have to start by thinking. Effective thinking towards making an investment will eventually result in positive personal finance skills.

We still have Kiyosaki’s idea that you will have to develop a positive attitude toward money before investing. If you’ve never seen your parents or guardians doing the art of multiplying money, it might be tough for you to start.

But that doesn’t mean you can’t learn about it. However, you will have to change your negative mindset and proceed to invest. I always recommend investing in ventures that you are sure about their future growth.

For instance, real estate investment is something that is growing rapidly and directly proportional to the population. 

Build up your savings—even if it takes time

Sometimes back, I talked about different ways you can save money effectively. Of course, it has never been a walk in the park to save money. Apparently, you will have to deny yourself some wants to save effectively. 

Learning about saving money and implementing it effectively is a solid personal finance skill that can help you out. Remember, you can not take loans to invest in if you have some savings. And that will be milage in your financial freedom journey.

Hill insinuates that everything and every investment plan needs some cash to start. Therefore, before you start investing, think about saving more than enough cash for it.

Recognise lifestyle inflation

The most likely scenario is living a more expensive lifestyle whenever your salary rises. I’m not against it, but that could lead you to a bad financial status. As you may know, jobs are not permanent, and businesses can collapse. 

So, I’m saying that it’s good to maintain your lifestyle even after you have more money for spending. Instead, you can focus on building different income streams to help you in times of need. 

In 2022, lifestyle expenses are shooting day in and day out due to the pandemic and the Russian-Ukrainian war. Therefore, it’s time to learn how to scale up your budget if you want to survive this economic meltdown. If you learn the skill of proper budgeting, you will overcome the lifestyle inflation challenge.

Reduce recurring charges

It’s possible to subscribe for monthly supplies of beverages or anything you may need from the store. When the time comes, the store deducts the cash automatically for the items you need from the card you specified. 

Still, I’m not forgetting about online subscriptions for things you don’t need at the moment and also mobile phone charges. Since you’ve authorised payment of such subscriptions, you get a notification once the cash is deducted.

You should now check on all your subscriptions and remove the unnecessary ones. That will help you save some coins that could have gone to an unnecessary expense.

Pay Your Bills on Time every month

If you want to succeed in personal finance skills, it’s good to practise paying your bills every time. Never wait for the bills to pile up because it will be tough to manage them.

In addition, paying your bills on time ensures that you don’t get penalties for late payments, saving you money. Therefore, save yourself the frustrations and ensure you pay off your bills whenever needed.

Secure emergency funds

An emergency need can knock on anyone’s door. Therefore, you should always ensure that your emergency funds kit is always filled to the grip. 

For instance, if you need to repair your car and you don’t have your income yet, you can use the emergency funds to sort that out. 

Remember that you may have to get a loan to sort out an emergency since it can’t wait, which is a bad idea. But if you want to succeed in personal finance, you should learn to avoid debts at all costs.

In addition, you should not mix emergency funds with your savings since they serve different purposes. So, ensure that you keep emergency funds ready at all times. 

Open your account anytime, anywhere

Bank accounts are an excellent way to make different financial plans. For example, you can get a savings account, an investment account, and a salary account. That helps you keep money in different account types hence making excellent decisions about your money.

The good thing about a bank account is that you can open different accounts from different banks. In addition, it’s also possible to manage them via the bank’s online sites.

Have insurance

Has anyone taught you how insurance can salvage you in times of need? Well, I will show you how much help you can get from insurance firms. 

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For instance, let’s say you get such or any of your family members; all your medical charges will not be a burden if you have health insurance. The same applies to car insurance and all other types of insurance.

However, you must be keen about the risk you are insuring against and understand the policy before signing the contract. Having reliable insurance can help you manage your funds wisely, and you won’t panic in case the risk occurs.

The Bottom Line

anyone can learn how to improve personal finance skills and eventually succeed. Therefore, it’s good to monitor your habits and you will eventually learn how to manage and multiply your money.

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