September 2, 2021

How to Guide: Personal Finance Basics


Just like learning to ride a bike or tie your shoes, people have to learn how to handle their finances. But unlike those childhood lessons, many people escape into adulthood with little-to-no training on how to handle money their money.

They have to learn the steps needed to reach personal financial goals. Learning to be financially savvy can take years of education, but knowing the basics of being economically solvent can be pretty straightforward – once you understand them.

Here are a few skills to have under your belt as you dive into the world of personal finance:

Spend Less Than You Earn

Spending below your means may seem obvious and straightforward, but debt wouldn’t exist if it were simple. Each month, only spend the money you have in your account, careful to avoid overdraft fees or to purchase things with a credit card you can’t pay the entire balance on immediately.

Spending less than you make allows you to save what you have leftover, establish a budget and create a savings and emergency fund to help with future financial goals or unexpected life events. Spending less than you earn is the first step in personal finance, and it’s a step many people struggle to achieve.

Establish A Habit of Saving

Your financial life will never start to improve until you can consistently save part of your income for future needs. Develop a habit of paying yourself first. Decide a certain amount each month, and move that money into a separate account before you do anything else during that month.

Before long, you won’t miss that money, and you will have a good amount set aside for things you need.

Pay Down Debt

Debt is significantly easier to obtain than to pay off once you have it. The only way to beat the debt cycle is to pay your debt every month and pay more than the minimum you owe.

An aggressive strategy to pay down your debt may slow your cash flow now, but you’ll save significant money on interest payments as well as free up cash in your budget later. Once you catch up on credit card debt, don’t charge more than you can pay off the next billing cycle.

Create A Monthly Budget

You will never know where you are spending your money and how much money you have until you create a financial budget. When you start tracking your spending, you can categorize your expenses to see where your money is going.

List all your expenses and add them up. Then, you will be able to adjust what you spend to afford better what you want. If you don’t have enough to pay for everything and save some as well, you’ve got to cut your expenses.

There are many ways to structure a budget. Here’s an example budget to show how much of your income should go to what category:

Fixed Costs: 50-60%

Your fixed costs include every cost you can plan for each month – mortgage or rent, electric and gas bills, groceries, car payments, gas, etc. Some of these costs fluctuate each month. However, you know how much each item will be.

These are the costs that you pay first, and these costs should be roughly half of what you bring home each month. Be sure to include reoccurring debt payments in this category if you have any.

Savings: 10%

This account saves up money for your larger financial goals. This money is for things like vacations, gifts, or other large purchases. Once you start saving enough, this money can be used for investments or paying towards your retirement – once you have saved beyond your current financial plans.

Emergency Fund: 5-10%

Your emergency fund is separate from a savings account. This money is to save for the unexpected costs in life – hot water tanks that go out, new battery for your car, and medical bills that are impossible to predict.

With a healthy emergency account, you won’t derail your ability to take vacations or meet the financial goals you’ve set up with your savings account. And, if saving specifically for these unforeseen events, you will significantly lower your stress when you have them because you will be financially prepared to deal with them.

Charitable Giving: 5-10 %

Giving to charities, like your church or local food pantry, will not only make you feel good about helping your community, but consistent giving throughout the year will help you once tax time rolls around.

Discretionary Spending: 20-30%

After you’ve paid all your bills, bought all your groceries, saved for big purchases and emergencies, and given back, the rest of your money is yours! Go out to eat, see a movie, buy a new dress.

With this particular budget breakdown, you still have a large amount of your money to spend on anything you want or need. This dedicated amount will create a sense of freedom in your budget, allowing you to easily save where you need because you know you will be able to spend the rest.


This article is for educational purposes only. Tulsa FCU makes no representations as to the accuracy, completeness, or specific suitability of any information presented. Information provided should not be relied on or interpreted as legal, tax or financial advice. Nor does the information directly relate to our products and/or services terms and conditions.