What Do You Really Know About Personal Finance?

When you hear the words “personal finance” it can have one of two effects on you. Either you get nervous or you feel pretty calm but in both scenarios you probably think you know way more about personal finance than you do.

A recent study in Canada show how people usually think they know more about personal finances than they actually do. More than 60 percent of Canadians felt they had a good understanding of personal finance, however, once a few questions were asked only about 35 percent knew answers to simple finance inquiries.

Another huge issue where personal finance knowledge is concerned is among generations. Baby boomers seem to know way more about personal finance than millennials. Only about 31 percent of millennials answered all the personal finance questions correctly.

So, what should you know about personal finance that you don’t already?

What You Should Know About Personal Finance

Having knowledge about personal finance is extremely important. Thinking that you know more than you do can be dangerous. Here are the personal finance basics you should know:

1. Always spend less than you earn. This is a basic personal finance tip. You should always spend less than you earn. So if you’re taking home $4,000 a month you should not be spending $4,500 a month on your regular day-to-day activities. This will make it possible for you to establish an emergency savings account and begin early financial planning.
2. Try to earn more. When you can, try to bring in more money. Whether you earn more cash through investments or a side job it can be great for your own personal finance. Once you start pushing for your cash flow to increase your finances will begin to better themselves.
3. Find ways to cut costs. Frugal living is another great thing to remember when it comes to personal finance. Always remember that if you need to cut cost (if you’re spending more than you earn or need to save) you can always look for ways to live frugally or trim your budget. Be sure you’re comparing prices and using all the available resources you have to save more.
4. Control your debts. Debt is a huge part of personal finance for many people. Controlling and paying off debt can be difficult but if you’re able to get your debt paid off or down it will positively effect your overall finance. If you’re not able to pay your debts down or off at this time be sure to communicate with debt collectors so that you can work out a payment plan. Doing this will help you shelter your credit score from more damage.
5. Money management and budgeting don’t have to be difficult. There are tons of tools out there to help you if you’re having trouble with personal finance. There are apps, like Personal Capital. You can also reach out to a financial advisor locally.

Lastly, never assume you know something about personal finance. It is a huge topic with a lot of material to cover (including ways to save, interest rates and how to stay debt free). If in doubt, you can always reach out for help or try out a personal finance app for guidance.

Photo: Raw Eva