FinanceBasics

Getting Started with Personal Finance

Simple steps to build a strong financial foundation

Getting started with personal finance doesn't have to be overwhelming. By focusing on a few key fundamentals, you can build the habits and knowledge that will support your financial well-being for years to come.

This guide covers three essential first steps in your financial journey: creating a budget, starting to save, and establishing a relationship with a financial institution through your first bank account.

Creating Your First Budget

A budget is simply a plan for your money. It helps you understand what's coming in, what's going out, and ensures you're making intentional choices about your finances.

The 50/30/20 Rule: A Simple Starting Point

If you're new to budgeting, the 50/30/20 rule offers a straightforward framework:

50% for Needs

Allocate 50% of your income to necessities like:

  • Housing (rent or mortgage)
  • Groceries
  • Utilities
  • Transportation
  • Minimum debt payments

30% for Wants

Set aside 30% for discretionary spending:

  • Dining out
  • Entertainment
  • Hobbies
  • Subscriptions
  • Non-essential shopping

20% for Savings

Dedicate 20% to financial goals:

  • Emergency fund
  • Retirement savings
  • Debt repayment (beyond minimums)
  • Other savings goals

Steps to Create Your Budget

  1. Track your income: Calculate your take-home pay (after taxes and deductions).
  2. List your expenses: Record all your spending for a month to see where your money actually goes.
  3. Categorize expenses: Group your spending into needs, wants, and savings.
  4. Set spending limits: Based on the 50/30/20 rule (or another ratio that works for you), establish limits for each category.
  5. Monitor and adjust: Track your spending against your budget and make adjustments as needed.

Tip: Many free budgeting apps can help you track expenses and stick to your plan. Look for apps that connect securely to your bank accounts to automatically categorize transactions.

Building Your Savings

Saving money is one of the most important habits you can develop. Your savings protect you from financial emergencies and help you achieve your goals.

Start with an Emergency Fund

Before saving for other goals, focus on building an emergency fund—money set aside specifically for unexpected expenses or financial hardships.

Emergency Fund Targets

  • Initial goal: $1,000 set aside for small emergencies
  • Long-term goal: 3-6 months of essential expenses

Tips to Build Your Savings

  1. Automate your savings: Set up automatic transfers from checking to savings with each paycheck.
  2. Save windfalls: Commit to saving a portion of tax refunds, bonuses, and gifts.
  3. Use the 24-hour rule: For non-essential purchases, wait 24 hours before buying to reduce impulse spending.
  4. Review subscriptions: Regularly audit recurring charges and cancel services you don't use.
  5. Find a high-yield savings account: Look for accounts offering higher interest rates to help your savings grow faster.

Remember: Start small if necessary. Even saving $25 per paycheck builds the habit and adds up over time.

Opening Your First Bank Account

A bank account is essential for managing your finances securely. It gives you a safe place to store your money, make payments, and build a relationship with a financial institution.

Types of Bank Accounts

Checking Account

For everyday transactions:

  • Direct deposit for paychecks
  • Paying bills
  • Making purchases with a debit card
  • ATM access
  • Money typically doesn't earn interest

Savings Account

For building your savings:

  • Emergency funds
  • Saving for specific goals
  • Earns interest (though typically modest)
  • Limited monthly withdrawals
  • No debit card for direct purchases

What You'll Need to Open an Account

  • Identification: Government-issued photo ID (driver's license, passport, etc.)
  • Social Security Number or Individual Taxpayer Identification Number
  • Proof of address: Utility bill, lease agreement, etc.
  • Initial deposit: Typically $25-$100 (varies by bank)

Choosing a Bank or Credit Union

You have several options when selecting a financial institution:

Traditional Banks

Examples: Comerica, Bank of America, Wells Fargo, Chase

Often have extensive branch and ATM networks, but may charge higher fees.

Credit Unions

Member-owned, not-for-profit financial cooperatives

Often offer better rates and lower fees, but may have membership requirements.

Online Banks

Examples: Ally, Capital One 360, Discover Bank

Often offer higher interest rates and lower fees, but no physical branches.

Important Features to Consider

  • Fees: Monthly maintenance fees, overdraft fees, ATM fees
  • Minimum balance requirements: To open an account or avoid fees
  • ATM access: Location and number of fee-free ATMs
  • Mobile/online banking: Ease of use and available features
  • Branch locations: If in-person banking is important to you
  • Interest rates: Especially for savings accounts

Tip: Many banks offer student or beginner accounts with reduced fees and lower minimum balances. Ask about these options if you're just getting started.

Continue Your Financial Education

Learning about personal finance is an ongoing journey. Explore our other resources to expand your knowledge.

Learn About Banking Tools Explore Common Questions