When it comes to our personal finances, many of us are guilty of over-complicating things. We spend too much time worrying about trivial things:

Should we give up our morning coffee? Which local petrol station has the cheapest fuel? How much should we spend on our best friend’s birthday present?

We get so caught up in the small things, that we forget about the bigger picture, the fundamentals. In this post we’re going to discuss 5 personal finance fundamentals that we all need to be reminded of every so often

1. Earn more than you spend

Whilst this may seem blindingly obvious, it’s something that many of us tend to overlook. Browse any personal finance forum and you’ll see threads littered with people looking for tips on how they can save for a home, pay off their student loan or simply improve their financial situation. Whilst there may be certain ‘money hacks’ or ‘shortcuts’ that can help, it all boils down to money in vs. money out.

Calculate how much you earn each month then make sure you don’t exceed that. The less you spend, the more you save.

2. Budgeting is beneficial

finance fundamentalFor most people, drawing up a monthly budget will be beneficial for money management. Budgets give you a better understanding of much you’re earning and how much you’re spending. They allow you to highlight any areas where you’re haemorrhaging cash and act accordingly.

The issue that many have is that they expect budgeting alone to improve their finances whereas it is in-fact the action that you take once you’ve created the budget that improves your finances.

Focus less on the execution and more on the subsequent actions.

3. Prioritise debt over spending and saving

A lot of us are guilty of being impatient when it comes to saving, and it’s easy to see why. Everyone has their own motivation for saving money. Some may be saving to get on the property ladders, others may be saving for a new car. Regardless, having savings is the ultimate safeguard against financial emergencies.

One major mistake that many of us make is prioritising saving over paying off debt which, regardless of its size, should always be your number one priority.

In simple terms debt costs money, savings don’t. So whilst you may feel better about the fact that you’re putting money into savings each month, the reality could be that you’re spinning your wheels.

Essentially, the interest you pay on your outstanding debt will be swallowing a portion of your savings. Don’t let this happen – clear debt first, save money second.

4. Automate your finances where possible

In a world where money seems to hold such power, it’s important to forget about our most precious asset, time, nd let’s be honest, none of us want to be spending our precious time worrying about money.

This is where financial automation comes in.

With the introduction of the internet, and subsequent launch of online banking systems, we now have the power to automate almost every aspect of our finances. Invest time into automating your finances now to save you time in the long run.

5. Expect financial emergencies

Positivity is hugely beneficial in all walks of life however, one area where ‘expecting the worst’ can be beneficial, is your finances. Financial emergencies happen, and frankly, they happen more often than we’d hope. The car fails its MOT, your key snaps in the lock, your boiler is on the blink. Fixing these things cost money, money that many of us simply do not have on-hand.

Creating an emergency fund is one of the least attractive motivations for saving money, but one that will probably have the most positive impact on your finances.

How much should you look to save for an emergency fund? Generally, 3 x your monthly income is enough, however even a couple of hundred pounds will be beneficial.