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5 Things to Know about Personal Finance

5 Things to Know about Personal Finance

This article from Lifehack gives a great introduction to five important concepts in personal finance, from getting into credit card debt to why you should invest your money.

  1. How credit cards work

Most young adults start using credit cards or their parent’s cards without fully understanding how it works. It might be a good idea to understand first how interest rates and compounded interest are computed.

 

  1. How to create a budget

Creating a budget is not rocket science. There are no rules how specific or how general it should be as long as you find a system that works for you.

 

  1. The time value of money

In general, if you invest the money you have today it would earn interest over time. Keeping your money in a savings account would eventually diminish its value because of inflation. The objective is to invest your money so it would overtake inflation.

 

  1. Start investing early

This illustration explains well the time value of money. If you start investing early, you earn more.

  1. Make your money work for you

If you are working, your salary is your active income because it results directly from your efforts. If you invest your savings, the interest it earns is your passive income – your money working for you. Make your money work for you as much as you can.

 

To read the full article, click here.

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