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Personal finance basics

Updated: Nov 2, 2021

I want my blog posts to educate readers, and at times, share my opinion. Full disclosure, some posts have affiliate links which is a way for bloggers to make money. You can learn more about that here.


If you want to ignore everything that is read below and focus on the ONE thing that really matters in personal finance, MAKING MORE MONEY, then click this link and read how to start a money-making blog.

Making more money can make it easy to ignore many of the items below. If you make more money you don't really have to worry about budgeting, or your bills (set up auto-pay and move on), reducing debt is much easier when you are making more money.

According to Investopedia "personal finance is a term that covers managing your money as well as saving and investing". More simply put, personal finance basics are defined as the things that go into your net worth.

Below you will find some really basic terms and guidance around personal finance. I would love your feedback and am always happy to answer any specific questions you may have.

Last, click the link below to get your free step-by-step guide to creating healthy personal finances and to ensure you keep up with all the tips and tricks our team shares. Even if you are making more money, having a guide to show you smart ways to spend it couldn't hurt!

Personal Finance Basics

  1. Budgeting

  2. Bills

  3. Reduce debt

  4. Emergency funds

  5. Credit scores

  6. Credit cards

  7. Save for retirement

  8. Investing

  9. Insurance

  10. Estate planning

I've laid out the list in this order for a very specific reason. If you are just starting your personal finance journey then you should start at the top of this list and work your way down. The first thing you should learn about and master is budgeting, or spending less than you earn. Next, you should focus on paying bills on time. Then, focus on reducing your debt. And so on down the list until you have mastered every part including estate planning.

My wife and I are currently on the journey above. We have not mastered every part of this list, but we are actively working our way down so we set our financial future up for success.


I'm personally not a huge proponent of budgeting because my personal experience wasn't great. I tracked every dollar spent in an excel sheet and that became too much to manage. Nowadays there are tools like PocketSmith and Personal Capital that help make budgeting way easier. You connect your accounts to their software and they do the rest for you. Another app that I really love is Digit because it is super simple to use, is mobile optimized, and has a user experience that I think is second to none.

If you aren't interested in linking your accounts and still want to set up a budget that can be done fairly easily. For our family it was easiest to review our spending at the end of the month. It was important for us to take any extra money and put it into our savings account. So, if our savings account was growing month over month we knew our budget was healthy. If at the end of the month we didn't have any extra money to put into our savings then we needed to eliminate some spending so the following month we would have money left over.

One other very important part of our budgeting was to set up calendar reminders on the first and fifteenth of every month. Those were the two dates we had bills come out. Within those calendar reminders, we listed all our bills and the average total we would spend on them each month. As an example, on the first, we had rent, student loans, gas, and internet. So, we had to have at least that much money in our account on the first of every month. Whatever we had to do to ensure that much money was in our account, then that's what we did. Then we set up the same system for the fifteenth of the month. That gave us fairly short time periods to really focus our spending habits to hit the goals we wanted to hit.


Minimizing your bills is a key component of setting yourself up to have a healthy financial situation. Part of the budgeting process should include a thorough review of any bills you have regularly coming out of your accounts. Identifying subscriptions you may have signed up for and no longer need/want will be the first thing you want to do during this process. The next step will be to identify any ways you can reduce your must-have bills. During this process, we were able to save $20/month off our cell phone bill. We also were able to cancel a few subscriptions we just weren't using anymore saving us an additional $35/month. All told during the bill review process we were able to cut $55/month in expenses.

If you want to take this to another level you can dive into your grocery and take-out expenses. Are you buying too much food? How do you even know if you are buying too much food? Well, if you are throwing any food out, then you are buying too much. If you don't have room in your cupboards/pantry for more food, then you probably are buying too much food. Take some time to really zero in on what your exact needs are from a food perspective. You can walk through this "deep dive" for basically any of your bills, insurance, electric bills (do you leave lights or the TV on unnecessarily?), and so on down your list of bills.

Reduce Debt

Now that you have determined what your budget looks like every month and reviewed your bills for opportunities to save money it is time to take those savings and direct them toward reducing your debt. This is easier said than done. For most, the natural inclination would be to spend those extra funds. If you are serious about healthy personal finances, then now is the time to lean into that debt and knock it out.

Most debt can be categorized into two buckets, good debt, and bad debt.

Good debt:

  • Mortgage

  • Student loans (if you earned your degree and that degree has increased your earning potential)

  • Car loans (if the amount owed on the car is 1/3 of your annual pay)

Bad debt

  • Credit cards (if you can't pay your whole bill every month)

  • Payday loans

Many people think that car loans are bad debt because a car depreciates in value. Today, interest rates are extremely low and for many, a car is a must-have item to get you to your job. If you purchase a car that is well within your means then it can be a form of good debt. Pay your bills on time, at a really low rate, and you have a great way to increase your credit quickly.

Allocating any savings from above toward reducing bad debt will prepare you for the next step in the personal financial health journey

Emergency Funds

Emergency funds are a concise way of saying savings you aren't setting aside for a vacation, car, home, or some other big-ticket item. Savings are the extra money you have set aside, can easily get to, and plan to spend on something in the near future. Emergency funds, on the other hand, are there only for emergencies. If you lose your job, or a loved one gets ill, you need to have an emergency fund to help pay your bills during a challenging time.

The question you may be asking yourself here is how do I know when to set up an emergency fund vs pay down my bad debt. That is a tough question and most folks would say, you don't start your emergency fund until you have no more bad debt. I would disagree because an emergency can happen at any time and if you are solely focused upon paying down your debt and something bad happens, there is a good chance you will just acquire more bad debt to get you through that time. So, start your emergency fund shortly after you have determined your plan to eliminate your bad debt. Maybe you set up recurring payments to eliminate your bad debt in 6 months, but that would leave nothing left over for your emergency fund. In that case, you might want to extend your payments to 9 months, pay a bit of additional interest, so you can start your emergency fund.

While mathematically speaking the plan above would cost you more money in interest it does get you a jump start on that emergency fund and that is something that many of us need. To see a little bit of money piling up can feel really good. You spent all that effort pouring over your spending to save a few extra dollars a month and to focus all your attention on eliminating debt doesn't feel quite a good as building up some savings.

Before you move on focusing on your credit score you have to get your plan in place to pay down your bad debt and build your emergency funds. Once those are in place you should be ready to move on to the next phase of your personal finance journey.

Credit Scores

Credit scores are a numerical value associated with your debt and payment history. There are quite a few more ingredients that play a part in determining your credit score as you can see below. If you have taken the steps above your credit score will begin to rise. Knowing more about your credit score and how to improve it is a very important part of your personal financial health. You can check out your score at myFico, or Experian, or Credit Karma, or TransUnion, or many other places online.

Credit Cards

I deliberately place credit cards after credit scores because you can get a much better credit card, with a lower rate, and better offers, if you have an outstanding credit score. So, focus on your credit score first, then move on to a credit card.

Credit cards have a bad wrap in some circles, but they can be a great tool for building up your credit. There are also a ton of cards that offer rewards like cash back and airline miles. If you are looking for a credit card check out my article to help you make an informed decision. If you use your credit card within your budget then this will help you build up your credit score.

Save for Retirement

Anyone that has an opportunity to invest in a company 401(k) should do so the moment they can. While calculating compound interest isn't something I can do, there are a ton of calculators out there that can help, just search "retirement calculator" and click on any of the links. Take a look at the difference between someone who starts saving at 25 vs 30.

For this particular example the 30-year-old is losing out on $500,000 in retirement savings, all else being equal. That is a substantial amount of money. Yes, you can tell yourself that you will save more later, but for most that simply isn't a reality. So start saving now!


Investments are different than saving for retirement in a few ways. Saving for retirement typically occurs through an employer's offering. Investments can fall into a ton of different categories. You can start a Roth, buy real estate, buy gold or bitcoin, buy collectibles, buy stocks or bonds, and the list goes on and on. Investments can be tricky and I would suggest working with a professional if you have funds available to begin your investment portfolio. If you are planning to start investing I would explore Wealthsimple if you want a simple robo-advisor that makes the process simple and easy. If you want to start small apps like Acorns are a great tool to invest a little bit at a time. Acorns connect to your bank account and if you swipe your debit card for $10.50 they will invest $0.50 on your behalf. It's a cool tool and you really don't notice the money is being invested. If you sign up with the links above you will get $5 added to your account.

However, you want to start investing is up to you. If you have the extra money and have found a professional or software solution that works for you, then you are in a great spot and should absolutely make it a part of your personal finances.


Buying insurance comes with a whole slew of things to learn about. Annuity vs term life insurance. Umbrella insurance isn't just for rainy days. If you are in a position where insurance has become a part of your financial plan then you are on your way! This is another area of personal finance where a financial planner will be very useful. They should know the amount and type of life insurance that is best for your particular situation.

Estate Planning

While no one wants to think about death it will come for us all eventually. Having a plan for any assets you have is super important. Without this plan, the government steps in, and anything of value you have may not end up in the hands of your loved ones. A will/trust/estate plan tells your family what to do with your assets when you are gone. Whether you are new to your career and have 5% of your first paycheck in a 401(k) or are nearing retirement, that plan ensures things are handled the way you prefer. Without a plan, your loved ones are left to figure everything out on your behalf which can be burdensome during an already difficult time. You can get a will/trust/estate plan through a local attorney or an online legal service site like Legal Zoom or Trust & Will.

One other thing: Negotiating to save money is normal

I spoke about the top 5 ways to impact net worth in a previous post that focused on negotiating for better rates on large purchases. In reality, you can actually ask for a discount on a ton of different things. I'm putting together my definitive list of bills/costs you can negotiate and will publish that later (I'll link it back to this article to help make it easier to find).

For many, asking for a discount can be tough and potentially come with a stigma. Keep in mind that asking for a discount can actually be commonplace. In today's day and age with businesses struggling to keep themselves afloat, any sale is a good sale no matter how small their margins. If you are talking with a sales associate and they can't/won't offer a discount ask for a manager and see if they are willing. You most likely won't get a discount from a big box store, so don't go asking Walmart for a discount on your grocery bill, but you can ask the local furniture store or local boutique.


Learning about personal finance basics is something we should all prioritize. The benefits of understanding your money can have a lasting impact through your retirement years and even on the lives of your children. The amount of time it takes to work your way through each and every part of the list above is fairly minimal when you compare it to the positive outcomes you will see as a result.

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