What Is Personal Finance?
- UpdatedOct 24, 2024
Personal finance involves your money in all of its forms– the money you owe, the money you earn, the money you spend, and the money you hope to have someday. Your security and comfort now and in the future depend on your personal finance decisions.
Personal finance tips help you with these important tasks:
Budgeting so you have money to spend on what’s most important to you
Protecting your credit rating so you can borrow for less
Managing debt and borrowing carefully
Saving and investing for goals like vacations, a home, college and retirement
Protecting what you own with insurance
It’s very difficult to create financial wellbeing without a plan. The personal finance tips on this page will help you develop and execute your own plan and enjoy financial health and success.
How to Create Your Yearly Financial Plan
Budgeting
If you think that budgeting will suck the joy out of your life, you’re wrong. Budgeting helps you have more money for what’s really important to you by showing you where you can cut back – the things that are less important to you.
So budgeting is really about setting priorities and being mindful when you open your wallet. If you love to travel, for instance, you might choose to live in a smaller place, drive a cheaper car, or own a more basic wardrobe because those things matter less to you. People get into trouble when they spend more than they earn because they’re not paying attention.
Budgeting 101: The Basics of How to Budget
Bills.com Budgeting Calculator
5 Budget Apps to Make Budgeting Easier
Understanding Credit
Your credit rating impacts your life in many ways, from your ability to buy a house to what you pay for insurance, and even your employment in some industries. So it’s smart to establish a solid credit history, earn a good credit score, and protect it as best you can.
It’s important to note that even if your credit score is low today, you can start improving it right away. Credit reporting agencies give recent activity much more weight than older history when calculating your credit scores. And some strategies can raise credit scores very quickly.
Understanding Your Credit Score
How to Rebuild Your Credit Score
Smart Borrowing
While living debt-free is an admirable goal, most of us have to borrow for things we need – like houses, automobiles, college, businesses, emergencies, and investments. Smart borrowing means finding cheaper loans, borrowing only what you can afford to repay, and not carrying debt for unnecessary items.
You can pay much less for auto loans, mortgages, personal loans and credit cards by maintaining a high credit score, shopping for the best lenders and paying off your balances as quickly as you can.
Finding the Lowest Mortgage Rates
Personal Loan Mistakes to Avoid
Saving and Investing
It’s important to establish several different types of savings. Your first goal is to save an emergency fund to cover unexpected expenses or an interruption in your income. Depending on your job, experts recommend putting aside enough to cover two-to-six months of living expenses. This money should be kept in an accessible account and in low- to no-risk investments like insured savings accounts.
In addition, you’ll save for mid-range goals like the down payment on a home, college tuition, and perhaps a bucket-list trip. It’s okay to tie up those funds for longer periods and to take a bit more risk to increase your returns. And finally, you should start savings for retirement as early as you can. Compounding the interest on your investments over decades dramatically increases what you’ll have when you retire. Your portfolio will likely change as you progress in your career and as you approach retirement, and you’ll probably seek guidance from a financial advisor.
Best Apps for Building Savings
Should You Start a 529 Savings Plan?
Miscellaneous
13 Insurance Terms You Need to Know
Why You Need a Will Even if You’re Not Rich
A look into the world of debt relief seekers
We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during September 2024. This data highlights the wide range of individuals turning to debt relief.
Debt relief seekers: A quick look at credit cards and FICO scores
Credit card usage varies significantly across different age groups, reflecting diverse financial needs and habits.
In September 2024, the average FICO score for people seeking debt relief programs was 577.
Here's a snapshot by age group among debt relief seekers:
| Age group | Average FICO 9 credit score | Average Credit Utilization |
|---|---|---|
| 18-25 | 566 | 90% |
| 26-35 | 572 | 84% |
| 35-50 | 572 | 84% |
| 51-65 | 579 | 82% |
| Over 65 | 595 | 81% |
| All | 577 | 83% |
Use this data to evaluate your own credit habits, set financial goals, and ensure a balanced approach to managing credit throughout your life.
Home-secured debt – average debt by selected states
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) (using 2022 data) the average home-secured debt for those with a balance was $212,498. The percentage of families with mortgage debt was 42%.
In September 2024, 25% of the debt relief seekers had a mortgage. The average mortgage debt was $236504, and the average monthly payment was $1882.
Here is a quick look at the top five states by average mortgage balance.
| State | % with a mortgage balance | Average mortgage balance | Average monthly payment | |
|---|---|---|---|---|
| California | 20 | $391,113 | $2,710 | |
| District of Columbia | 17 | $339,911 | $2,330 | |
| Utah | 31 | $316,936 | $2,094 | |
| Nevada | 25 | $306,258 | $2,082 | |
| Massachusetts | 28 | $297,524 | $2,290 |
The statistics are based on all debt relief seekers with a mortgage loan balance over $0.
Housing is an important part of a household's expenses. Remember to consider all your debts when looking for a way to get debt relief.
Support for a Brighter Future
No matter your age, FICO score, or debt level, seeking debt relief can provide the support you need. Take control of your financial future by taking the first step today.
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