As the classic, but rather heartless saying goes, money makes the world go round. You can’t get far in this world without money, so it’s important that you know how to manage it. Obviously, there are a lot of different factors to this, and it’s much easier said than done. If you’re about to leave education, or you’re just sick of having disorganised finances, then you’ve come to the right place. Here, we’ll look at some of the most important things to know about personal finances. It won’t be exhilarating. However, the luxuries you’ll be able to afford certainly will be!

The first thing you need to know is how credit cards and credit scores work. Credit cards are a really interesting invention when you take a step back. They can either be your greatest ally or your worst enemy, depending on how you use them. If you’re smart with your spending, your personal finances will end up better off. If not, then you could end up spiralling into debt. The biggest issue with these little plastic rectangles is that we get hold of them before fully understanding them. Study all the conditions carefully before applying for any credit card, and their general system of interest. Credit scores are another important thing to understand. These are a permanent financial record, which like a card can work for or against you. What’s a good credit score? That’s a question for a whole other article.

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Create Budget

You also need to learn how to create a budget sooner rather than later. Sitting down and working through your budget is something you’ll either love or hate. Seen as you’re reading this post, I’ll go with hate! Whatever your take on home budgeting, it’s important to know where all your money is going. If you impulse buy until you’ve run through your pay cheque, then you should have been drawing up a budget yesterday! You want to get to a point where you know where every penny of your income goes, and you notice discrepancies as soon as they happen. I know that’s a tall order. However, it’s certainly not impossible! Start off by keeping all your receipts, and going through them at least once a week. Gradually wean yourself off wasteful habits, and onto smarter ones.

Time Value

You should also learn how time affects the value of money. Time value is one of the more basic principles of finances. Any given amount of money is worth more right now than it will be a year from now. This is down to its earning potential. If you have $100 to invest right now, and you average 10% on your investments, you’ll have $110 a year from now. On the other hand, if you let the money sit there, it will only be worth $90 a year from now. This is due to the value lost over time. This ties in closely with my next point.

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Early Investment

You need to realise the value of investing early sooner rather than later. If you start investing earlier in life, the time value of your money will gain much more than money which is invested later. This factor is distinct from the amount of money you actually invest, which a lot of young adults fail to understand. If you invested $20 ten years ago, you’d have a greater return than someone who invested $100 in the same way two years ago. As a result, people who start sitting on their nest egg sooner have more to spend when they reach retirement. I know that you may want to put off investing until you have more capital to throw around. Start earlier though, and you’ll thank yourself further down the line!

Debt Management

Finally, debt management. No matter how careful you are, there are some things in life which you can’t foresee. Births, health crises, or economic crashes can all pop up out of the blue, and throw your finances into the air. If you end up in debt, then you need to have a proactive approach to getting back out of it. Many people misunderstand their interest rates, which leads to more and more overspending, and in turn more debt. Usually, getting out of debt is a matter of tightening belts and self-discipline. However, when you have a good understanding of debt management, you can save yourself without feeling too much of a pinch.

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Work your way through this list, and you’ll be much more comfortable in the future. Dealing with finances may be dull, but the work you put in will certainly pay off!