11 Truths About Good Personal Finance

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Think you're financially savvy? Well, your bank account and credit score may tell a different story. Personal finance isn't always the easiest topic to address or even grasp, for that matter. And with so many misconceptions about good money management, you may inadvertently make mistakes that affect your financial future. (See also: Financial Mistakes to Stop Making This Year)

However, if you learn the truth about good personal finance, you'll have the knowledge and power to take your money to the next level.

1. Living With Your Parents Doesn't Mean That You're a Bum

College graduates typically can't wait to move out of their parents' home and get their own place. But while this provides a measure of independence, moving out too soon can rob you of any opportunity to start building your financial nest egg.

Between high rent, low pay, and other financial responsibilities, you could end up living paycheck to paycheck with little left over for savings. If your parents are agreeable to the idea, stay home for a couple years while you work full-time. The rent you pay your parents will probably be less than the cost of living on your own. (See also: 16 Tips for Boomerang Kids)

2. Limiting Small Indulgences Can Build Your Savings Faster

Getting coffee every morning and going to happy hour may seem like small purchases, but these can add up quickly and cut into any disposable income. Think about this: spending $10 a day on miscellaneous expenses during the workweek equals $50 a week. That's $200 a month and over $2,000 a year.

3. You Should Pay More Than the Minimum on Debt

You may know the importance of paying more than the minimum on credit cards, as this is a way to eliminate debt faster. But this suggestion doesn't only apply to credit cards. If you have a car loan, a mortgage loan, or a student loan, increasing monthly payments — by doubling or tripling what you send creditors — can get rid of these loans faster, helping you save money on interest.

4. Credit Cards Are Useful, but Dangerous

No matter how scary and dangerous credit cards can be, they are often necessary for building a credit score and handling emergency expenses. Just know that having a credit card in your wallet is likely to increase how much you spend. And if you can't control your spending, you could end up with massive debt.

Limit yourself to one or two credit cards. Only carry a credit card in your wallet if you're planning on using it for the day's purchases, and make sure you have a way to pay off the balance in full. (See also: Habits of Responsible Credit Card Users)

5. Always Read the Fine Print

Whether you're applying for a credit card or signing up for a service, always read the fine print. Some companies like to shove hidden fees and other miscellaneous costs in the fine print, betting that most people won't read this part of the contract.

6. Coupons Are Only Useful If You Need an Item

Frugal shoppers know how to save with coupons and promo codes. But if you shop only because you have a coupon, you will spend money unnecessarily and buy items that you don't need. To avoid this trap, put together a shopping list first, and then look for promo codes or coupons for the items on your list.

7. You Need a Safety Net

It doesn't matter how much you earn from your employer, everyone needs a safety net. No job is guaranteed tomorrow, and you could experience a medical crisis or another emergency that requires a lot of cash. The more cash you have in an emergency fund, the easier it is to deal with financial problems that come your way. (See also: How to Create Your Emergency Fund)

Aim for a three- to six-month cash reserve. You can automate your savings with your bank, take your lunch to work, skip a couple of vacations, or work additional hours to create savable income.

8. Don't Think of Your Tax Refund as Free Money

At the beginning of each new year, you probably can't wait to file your taxes and receive your check from the government. But before you run out and buy a big screen TV or plan your next getaway, look at how much you have in savings. Or better yet, put the money towards home repairs. It's okay to have a little fun with your tax money, but make sure you save a little and spend a little on the things that you really need. (See also: Smart Things to Do With Your Tax Refund)

9. Budgeting Can Help You Spend Less and Save More

While we're talking about saving money, a good budget is the best way to get your personal finances on track. "Budget" is a dreaded word, but if you want to know where your money goes, and if you want to make sure that you have enough for bills and savings, a budget is the best tool. There are plenty of free resources and tools online to get your budget started (Mint, Bankrate, Budget Tracker), or you can get professional help from a financial planner. (See also: Meet Wise Bread's Resident Financial Planning Expert)

10. Live Off Less Than You Earn

In a world where people are constantly trying to get more stuff, this notion often goes out the window. But if you learn how to live within your means and spend less than you take in each month, you'll have more in your savings account. Plus, if you ever lose your job or deal with any other economic hardship, the lower your expenses, the easier it is to maintain your lifestyle.

11. Peer Pressure Can Get You Off Track

You may have a budget and a savings plan, but if you hang around the wrong type of people, good personal finance can get pushed aside. (See also: How Peer Pressure Can Make You Poor)

Some of your friends, relatives, and coworkers are probably big spenders who don't share your view of money. They may mock your frugality or encourage behavior that can bust your budget. You need to recognize these sneaky traps and stick with your spending plan — no matter what.

Do you have another "truth" about good personal finance that you'd like to share? Let me know in the comments below.

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