Financial Planning for Personal Use: The Guide to Maximizing Your Money

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The definition of personal finance: The Guide to Maximizing Your Money
Personal finance is the practice of earning money, saving money, building wealth , and protecting assets.
by Hal M. Bundrick, CFP(r) Senior Writer | Personal finance, financial planning, investments Hal M. Bundrick is a personal finance writer as well as an expert on NerdWallet in financial matters. He is a certified financial planner and former financial advisor and senior expert in investing for Wall Street firms. Hal has advised families, business owners trusts, non-profits and nonprofits as well as managed group employee retirement plans in The South as well as the Midwest. Hal is now working to make financial matters understandable and uncomplicated.





Jul 12 2022


Written by Kathy Hinson Lead Assigning Editor Personal financial, credit scoring, managing money and debt Kathy Hinson leads the core personal finance team at NerdWallet. In the past, she worked for 18 years with The Oregonian in Portland in capacities such as chief of the copy desk and team leader for design and editing. Her previous experience includes news and copy editing for a variety of Southern California newspapers, including the Los Angeles Times. She received a bachelor's degree in journalism and mass communications at the University of Iowa.







The majority or all of the products we feature are provided by our partners, who pay us. This impacts the types of products we write about as well as the place and way the product is featured on the page. But, it doesn't affect our assessments. Our opinions are entirely our own. Here is a list of and .



What is personal financial?
Personal finance refers to everything related to managing your money. It can refer to matters as basic as tracking your spending and reducing your expenses -- or as intricate as estate planning and taxation. (Note that this is only one of several .)
Why is personal finance so important?
The process of managing money can be overwhelming. In fact, 4 out of five Americans (80%) are hesitant to make financial decisions, and 35% of those who delay those decisions say it's because they feel overwhelmed by the thought their financial obligations. This is according to the July 2022 NerdWallet survey conducted on the internet through The Harris Poll.
Take each facet at a time. Master that, then proceed to the next. Personal finance is important because it covers the four most crucial phases of managing your life security 1.) Earning money. 2.) saving money. 3) Building wealth. 4.) Protecting assets.
They can cross paths throughout your life. It's likely you've already accomplished some of the basics. Knowing that can provide you with confidence as you move to another project that will maximize your money.
Personal finance examples in every day life
Personal finance is more than a textbook theory. It is the foundation of how you live your life according to your own rules.
Take for instance, managing your cash flow so you're able to have enough money. Save for the future so you have the opportunity to explore your career -- and not feel trapped in your job because you have a pile of bills to pay.
Knowing how personal finance works can be empowering.
While 39 percent of Americans report feeling anxious when making financial decisions according to the survey, 30% feel confident and 17% are excited, suggesting it is possible to feel confident when navigating your financial situation. Knowing how everything operates can be the initial step in creating confidence.
13 essentials of personal financial planning
A lot of financial basics are achievable on your own with a bit of organization and a desire to maximize the money you earn. Planning for your estate and tax planning, along with investing, usually require assistance from a professional.
1. Making money
It's likely that there are millionaires living in your neighborhood who you would never suspect as being wealthy. They might earn less than you guess necessary to amass such an amount of money.
Certain people are wired for frugality. The majority of us must put in the effort to save some money. That's where the old saying, "it's not what you create, but what you keep" is applicable.
Here are some key personal finance concepts related to that:
Net income
Your take-home pay, or after all deductions, is the amount you'll have to put into your budget. It's the basis of your budgeting process. It's essential to understand the amount of money you'll be receiving after all tax, insurance and benefits are paid out to only spend what you have actually at the banks.
Side income
Want to make money but aren't certain where to begin? NerdWallet rounded up over two dozen legit methods to earn moneyno matter if you're at home or out and about and listed each option in relation to the speed at which you can start and earn money.
Many people are in favor of fast cash, don't discount the "slow" gigs, as they might cost you more in the long run.
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2. Controlling money
Banking
About 2 out of 5 (38 percent) Americans are likely to put off opening a brand new account with a bank or choosing the right bank according to the study. But , making the right choice can reduce your expenses and help you save more money.
Checking accounts
Find out more about one of the simplest types of accounts available to consumers.
Savings accounts
Get advice on and find accounts with low charges and the most favorable interest rates.
Certificates of Deposit
A CD account is a good option to receive assured returns from your money with minimal risk. CDs typically be the most lucrative for bank accounts. They are also federally insured, unlike investments stored in bonds and stocks.
Renting versus buying a home
Should you buy or rent an investment property? Check out our guide to determine which option is best for you.
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3. Building a budget
Systems have been designed in order to assist you comprehend and assess your relationship with money. Although they all share a similar purpose, they all employ different strategies to get there.
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4. Saving money
Interest
is the money you receive to loan out funds and also the amount that you pay for borrowing money. In essence it's the cost you are charged for the privilege of borrowing the money of someone else.
Emergency fund
A reserve is money that is set aside to pay for large, unexpected expenses like:
Medical bills that are not foreseen.
Home-appliance repair or replacement.
Major car repair.
Unemployment.

Health savings accounts
A , is a great way to save to pay for medical expenses, and also reduce your tax-deductible income. But not everyone can -or ought to enroll in the type of health insurance coverage that is required to establish an HSA.
The savings to purchase a home
Find out the amount of down payment you'll require, employ money-saving strategies and keep savings in the right type of account. Here are five helpful tips for .
Saving for college
A 529 plan could be an excellent option to save for college if you understand the rules and how to make the most of your investment. It is type of savings or investment account where money grows tax-free if the withdrawals are made for qualified expenses for education. They are named after a section of the IRS code.
There are two types of 529 plans. .
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5. Maximizing the credit card balance
Finding the most effective is part art, part science.
No single credit card is superior to all other cards in all categories -- or for all people. If you are aware of what options are available to you and asking appropriate questions, you will find the card that's the best fit to your lifestyle and financial situation.
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6. The borrowing of money
Vehicle loans
Find help in finding the perfect vehicle loan -- and find options if you're having trouble. The has calculators and tips on affordability, down payments and charges.
Student loans
Do you need to refinance your mortgage ? If so, how can you find the right lender or the best payment plan? NerdWallet has collected the resources that will help you answer those questions and more.
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Personal loans
Personal loans have an annual fixed percentage rate that range from 6% to 36%. The loan with the lowest rate is the least expensiveusually the best choice. Other features, including no fees, soft credit checks and whether lenders directly pay the creditors when you consolidate debt make certain loans apart.
We spent hours analyzing loans from over 30 personal loan companies to identify the lowest rates on the internet along with loan features.
Mortgages
Compare and choose the best mortgage for you. Whatever your dream of buying a house you'll find the right tools, calculators, and nerdy know-how to help you tackle your goals.
Compare mortgage rates.
Get preapproved.
Calculate your mortgage payments.
Find refinance refinance options.
Find out the value of your home.
Find the best mortgage lender.

Home equity
It is commonly said that homeownership builds wealth. What exactly is home equity, and how can it increase your wealth? Home equity refers to the current market value of your house, minus what you are obligated to. You're trying to find an amount that is positive. Gains are derived from one of the following: 1.) Reducing the principal balance of your loan. 2) A rise in market value over time.
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7. Your credit score
Credit score factors
The credit score can be described as a numerical number that lenders employ to decide how risky to lend you money or give you credit. Your score plus things such as your income and debt assist lenders in deciding whether or not they will approve your credit request and decide on rates for interest.
Two aspects are crucial in your credit report: whether or not you pay bills on time and how much of your credit card's limits you utilize (less is more).
How do you build credit?
If you do not have a credit score, it can be hard to secure a loan or credit card, or even an apartment.
How are you going to prove a track record of responsible repayment if no one is willing to give you credit in the first place?
Several tools can help you establish the foundation for . Here's how:
It is important to keep an eye on your credit score as it could affect how much you have to pay for your car as well as home insurance. the ability to lease a home or an apartment, and even your odds of getting some job offers.
can be a little like checking your blood pressure to see how your new exercise program and diet are impacting it. It's unlikely you'll notice steady progression that is unbroken, but it may let you know whether you're on the right path. A big, unexplained changes in your credit score or your reports must be taken note of; it could signal an identity theft issue or a mistake in your credit report.
How do you rebuild credit
Restoring damaged credit is harder than starting over. You're trying to show the credit card companies and lenders that despite a few slip-ups from your side or a disaster you had nothing to be responsible for, you're likely to make future payments as agreed. Take a look at these .
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8. Taxes
Find federal income tax brackets or the most effective tax software and estimate your tax bill- or refund at the . You can monitor your state and federal tax refunds and learn the latest tax deductions and breaks.
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9. Paying off the debt
Strategies to pay off the debt
More than one in five (22%) Americans are likely to put off creating plans to pay off debt According to the survey. However, getting rid from debt you could easily do with the right tools and determination.
Take it from those who've been there. The people profiled in NerdWallet's series took on thousands of dollars in debt using innovative strategies and everyday techniques.
can help you wrangle . It shows your debt-free date with your current payments and how fast you'd get there by increasing your monthly payments. It also lets you compare strategies for paying off and make payments.
Do you want to pay off your mortgage?
If you're thinking about making your mortgage payment, you're in an enviable position. That's assuming you are maxing out those retirement funds, have put aside a reserve fund for emergencies and you've accumulated a large sums of money in reserve to cover the mortgage loan debt.
Or perhaps you're considering an attempt to get that mortgage paid off faster.
There are many reasons why you might want to pay off the mortgage but are you?
How many times do you think it is too much?
Are you unsure if you are in excessive debt? Add up your monthly debt payments (like car loans and credit card charges or child maintenance) and divide by monthly income to get . Higher DTIs are often difficult to pay off and make accessing new credit lines difficult.
For example, a DTI higher than 43% could be overwhelming , and could be a sign that you require debt relief.
Relief from debt/bankruptcy
Are you finding that you're not getting any progress on your debt no matter the effort you put into it? If yes, you could have a problem with overwhelming debt.
To break free of that financial stress, look into the options. These tools could alter the conditions of or amount so you can get back on your feet more quickly.
But debt-relief programs are not the best solution for all. Understand .
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10. Insurance
Insurance is the transfer of riskfor a fee. A company is paid to take on a small amount of risk in the case of injury, death, disability or damage to property. It's one of those pillars of personal financial planning. The needs for insurance can change throughout life and can depend on family needs as well as your personal assets.
Life insurance
ensures that anyone who relies on your financial security. If you die unexpectedly life insurance will provide money that can replace your income and pay off your mortgage, or pay for your children's college tuition or any other expense you wish to pay for.
Homeowners insurance
Your home is more than just the roof that covers your head. It could be your most valuable asset -and one you can't afford to replace out-of-pocket in the event of a disaster. That's why protecting your investment with the appropriate insurance is so important.
Auto insurance
The average cost for car insurance costs $1,592 annually according to the NerdWallet 2021 rate analysis. Visiting insurance quotes frequently, in addition to other factors, can help lower the cost of insurance.
Annuities
Annuities are financial instruments that could help provide steady income in retirement. But an annuity can be a complex creature. Read an overview of how annuities work, its pros and cons and how they compare to IRAs.
Long-term care
It's hard to think about however, chances are that you'll require assistance to take care of yourself in the future. The big problem is: how will you pay for it?
Insuring long-term health insurance is one way to prepare. Long-term care refers to many different services that aren't covered under traditional health insurance. It helps pay for the cost of this care if you have an illness that is chronic such as a disability, disability or illness such as Alzheimer's disease.
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11. Investment
To buy stocks, you'll require an account at a brokerage that you can open in just 15 minutes. After you've added funds to your account, you can follow the steps .
Retirement accounts for retirement
A retirement account for individuals (also known as an IRA, is an investment account that has tax advantages individuals use for retirement savings. Contributions to some IRAs can be tax-deductible or withdrawals could be tax-free.
There are several types of IRAs including the traditional type, Roth, SEP or SIMPLE. IRAs are available through banks, robo-advisors, or brokers.
The brokerage account is a place to invest.
A regular , or taxable account has no tax advantages for investing through the account. However, in the majority of instances the investment income are taxed.
Plus, it means there are few guidelines for the accounts: You can pull your money out at any time, for reasons of any kind, and put it into however much you want.
Exchange-traded and mutual funds
The investors of mutual funds own shares of a company whose business is buying shares of other businesses (or in bonds, or any other security). They don't own the stock in the companies the fund purchases, but they do share equally in the profits and losses from the funds overall holdings, which is why they are "mutual" in mutual funds.
ETFs can be traded just like individual stocks, however they provide the diversification advantages of mutual funds. In many cases, ETFs will have a lower minimum investment that index funds.
Fixed-income investments
Such as government bonds or corporate bonds, may provide a reliable, steady source of income, often with a lower risk than other investments.
Along with stocks and stock mutual funds Fixed-income investments form the core of a diverse investment portfolio.
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12. Starting or running an enterprise
From loans to lender reviews, we'll assist you in connecting to the right resources to manage your business:
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13. Travel
Dreaming of a vacation? NerdWallet has the tools and tips to assist you in comparing and finding the smartest options to make your next trip as budget-friendly as possible.
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Learn more about personal financial planning.
Are you interested in learning more about each aspect of personal financial planning that we have mentioned? Listen to fascinating and informative conversations about money issues at any time you want by listening to NerdWallet's podcast.
Podcast of the NerdWallet Smart Money Podcast
Questions about money, addressed. This is from NerdWallet. Have a money question? Talk to any of our Nerds. Text or call us at 901-730-6373, or send us an email. Then join as well as listen to our podcast.
The METHODOLOGY

This online survey was conducted within the United States by The Harris Poll on behalf of NerdWallet between June 14 and 16 2022. It was conducted among 2,039 U.S. adults ages 18 and older. The sampling precision of Harris online polls is measured by using a Bayesian credible interval. In this case, the accuracy of the data sampled is by of + 2.8 percentage points, using a 95% confidence level. To learn more about the methodology of this survey that includes weighting variables and subgroup sizes Please contact Sarah Borland at
Disclaimer: NerdWallet disclaims expressly and impliedly, all warranties, of any kind, including those of quality and suitability for a specific purpose or whether the information contained in the article is true, reliable, or free of errors. The use or reliance you place on this information is at your own risk and its completeness and accuracy are not warranted. The information of this article should not be relied on or correlated with the performance in the future or performance of NerdWallet as well as any subsidiaries or affiliates. Any statements that do not reflect historically accurate are forward-looking statements that are subject to uncertainties and risks as stated by terms like "believes," "expects," "estimates," "may," "will," "should" or "anticipates" or similar expressions. These forward-looking statements may significantly differ from NerdWallet's presentation of data to analysts as well as its actual operational and financial results.










Author bio Hal Bundrick is a personal finance writer as well as a NerdWallet authority in money issues. The author is certified as a financial planner as well as a former financial advisor.







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