Personal finance skills are really important as they can help you to handle money, save for retirement, and establish an emergency fund. These are the skills that neither parents nor schools teach young kids. However, these skills are essential in the long run.

Do you know if you are a spender or a saver? What are the best ways to handle money and become financially fit?

Here are the basics of how to build and improve your personal financial skills without the need to turn to a professional financial advisor.

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Know the Flow

The first thing you should do is define your monthly cash flow. This is really important to understand the actual amount of cash you have on a monthly basis. Even if you think it’s not that easy to do, there are plenty of online apps that will be helpful.

You may choose the most suitable personal finance software and free budgeting online tools to determine your monthly cash flow and get some additional information about your current financial situation. This will be the basis for your personal finance skills and their development. How else will you realize if you are a spender or a saver?

According to the recent survey conducted by the CNBC and Acorns in partnership with SurveyMonkey, 56% of American citizens consider themselves savers rather than spenders. 75% of them try to handle their own money while just 17% turn to the help of a financial planner when it comes to money management.

Jon Cohen, the research officer at SurveyMonkey, said, “This survey proves that the majority of Americans believe that they are confident when it comes to savings. However, this is also their major personal finance concern and we need to educate people on how to handle their money better.”

Create a Budget

Many people don’t believe that it’s essential to make a budget and it can really help to avoid many financial mistakes. If you skip this step and keep on living your previous life, you will never become a financially independent person. Each category of your monthly spending needs a certain amount of cash. Budgeting can help you know in advance how much exactly you need to allocate to each category so that you can stay financially afloat until the next pay check.

When you finally know what you spend your money on, you will make wiser decisions about whether you want to cut out some categories or minimize spending. When you are making your budget, you can use a budgeting spreadsheet or just list the following categories:

1. Housing/rent
2. Utilities
3. Groceries
4. Clothing
5. Medical Costs
6. Pets
7. Transportation
8. Entertainment.

Then, if you see that you spend too much on entertainment or going out, for instance, which is less important than other categories, you may want to cut out this spending.

Invest Money Consciously

“I wish I could say my 20-year-old self that it’s significant to develop the habit of saving or investing. It is quite easy to start this habit, even if you save a few dollars per week in the beginning,” says Robert Pagliarini, the personal financial advisor.

Investment means growing your money. This can be an extra way of saving for retirement or for an emergency. More than that, this is one of the best solutions to stay on track even with continuous inflation and have a higher rate of return.

Consider developing this skill and invest your money wisely. Remember that you are the perfect asset that also needs investments in your education, skills, etc. Think of special certificates, educational programs, or online personal development courses that you can benefit from if you invest a little money today.

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Become a Wise Consumer

Do you always create a list of groceries you need when you go to a supermarket? Do you always search for the best price? Have you ever used coupons or looked at discounts?

Again, there are many useful apps and software that will tell you about the special offers and current coupons that you may use to improve your spending and save cash.

Start counting every dollar you spend. Yes, it takes some time and effort to search for the best prices, create shopping lists and look at the prices at the supermarket before you buy anything, but it’s totally worth it. Try implementing this skill in your life, and you will notice a difference in the amount of money that will remain in your pocket.

Separate Needs From Wants

There is a huge difference between wanting something and actually needing it. Write down two columns with your needs and wants and notice what you may cut off so that your budget doesn’t suffer. For example, if you suddenly think that you “need” to purchase a new laptop, take some time and think about it.

Does your current laptop work well and meet your needs for work? Do all the programs function properly?

If it is suitable for work and pleasure and there are no major issues, then you actually “want” a new laptop. Then it goes into a particular category that you can review later when you have enough money in savings to purchase something from your “wants”.

Have the Same Financial Goals as Your Spouse

If you have a partner or a spouse with whom you share money or have a mutual budget, it’s essential to have the same financial habits and develop your financial skills together. Become a team and work together towards your long-term goals. It can be really challenging to have a mutual budget with a person who is a spender if you are a saver, or vice versa.

Try to get on the same page, make your monthly budget and talk about the things you need to spend money on a monthly basis. You may even want to turn to the professional help of a financial planner and ask for advice on how to apply this strategy and handle money in your family.

Become More Responsible About Your Goals

The last but not least step is to finally understand that you are accountable for your own life. If you want to achieve something and become more financially fit, you need to become proactive and take responsibility. Your life is in your own hands, so become more thoughtful of the things you do and the financial decisions you make. You have a unique chance to craft your life with your own hands and become everything you wish.

Take action, set goals and make a plan on how to achieve them. Only by being active and determined will you be able to avoid debt and become financially free.

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Build and improve these personal financial skills so that you feel more secure and stable in the future and can enjoy retirement. It is never too early to think about your future!

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