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There is a plethora of information out there on finances and how to handle them. Sometimes it can be complicated and confusing.
In this post, I want to focus on the basic money skills that anyone should work to attain.
Having basic money skills can help you make good financial decisions, give you peace and confidence as you move forward throughout your life. In this post, we are talking about budgeting, prioritizing, saving, and paying off & avoiding debt.
Budgeting is one of the most important basic money skills because, without it, there is no plan for your money.
Getting into the habit of budgeting and using this skill will increase your awareness, your quality of decision making and your ability to reach your goals.
You will be completely aware of what is happening with your money because you are writing everything down.
Being aware of income and expenses and how you actually spend your money is a key basic money skill. Your quality of decision making will increase because you will be able to decide based on your budget how you should proceed.
For instance, you may really want that brand-new laptop, but your budget is going to help you decide if that is something you can buy right now.
You will also increase your ability to reach your goals because you have a complete understanding of what is happening in your finances, which means you can change it.
If your goal is to save more money, you can work your budget to reduce expenses and increase savings.
Maybe your goal is to spend less and pay off debt, the budget will help you make that happen by deciding on how much money goes where.
Need some help with budgeting? Check out these posts:
- 5 Simple Steps to Create a Budget
- Budgeting Tips for First Timers
- How to Budget on an Irregular Income
- Budgeting Myths and How To Bust Them
Another basic money skill is prioritizing. A lot of times with money, we try to do everything at once.
We try to buy a house, get a new car, purchase a nice computer, get new furniture, go on a nice vacation and save money all at the same time.
Prioritizing is important because it allows you to focus on specific things.
Are you in debt? Then it is important that you prioritize paying off that debt so you stop incurring interest.
Do you have zero debt but are looking to buy a home? Focus on saving up for a nice chunky down payment so you can save money in the long run and avoid private mortgage insurance.
Find yourself in need of a different car? It is time to prioritize saving up money to purchase a different car.
Prioritizing is of the utmost importance because it allows us to take a step back, slow down a bit, and decide what is most important at the current moment. Doing this, instead of trying to do everything at once can certainly help you not get so overwhelmed. Focus on one, or a couple of things at a time and not 4, 5 or 6 and you will see the benefits.
Saving is definitely a basic money skill that we must master.
Why? Well, saving can do a lot of different things, it can allow you to purchase nice things, it can help you feel secure and it can give you a lot of freedom.
Imagine saving up money and being able to buy whatever you want. Having the basic money skill of setting money aside will help you to get your future dream car, and the vacation you’ve always wanted.
A dream car and awesome vacation is great but think about the other end of the spectrum for a minute as well. When things don’t go so great, or according to plan you definitely want a backup plan. Saving up money for things like an emergency or rainy day can help you feel secure and confident that if something happens, you’re prepared.
Lastly, if you get this skill down really well, it can help you experience a lot of freedom later on in life as well. Setting money aside for the short term is great, the mid-term is also good, but even better is the long-term. Looking ahead 10, 20, 30, even 40 years from now and you can see how a small habit of saving and using that money to invest it each and every month can turn that amount into something HUGE.
Not sure what you should be saving for? Check out these posts:
Paying Off & Avoiding Debt
An awesome basic money skill is to focus on getting out of debt, then avoid ever adding any more!
Imagine with me for a moment that you have taken the time to get out of debt.
Need some inspiration for becoming debt free? Check out these blog posts:
- How We Paid Off Over $43,000 in Student Loan Debt in Less Than 2 Years
- The Debt Snowball and Why it Works
- Debt Free Inspiration – Learn How This Mom Paid Off Her Debt in 2 Years!
Think about it… if you don’t have ANY payments you can save more money, give more money away and overall have more money in your pocket.
Zero debt = tons of opportunities!
Not to mention security in knowing you owe zero people, zero dollars.
These basic money skills can apply no matter what part of the personal finance process you’re in. What is your favorite basic money skill, and why? Let me know in the comments!