Personal Finance 101: The Beginner’s Guide to Personal Finance


We started The Finance Twins because we were broke growing up and vowed to end the cycle. We didn’t know the first thing about personal finance or how to manage money when we were in high school, but we knew it was important to be fiscally responsible.

So we read everything we could about money for YEARS. The truth is we would’ve done anything for a beginner’s guide to personal finance like this.

That is why we want to share everything we’ve learned with you so that you can improve your financial life and stop living paycheck to paycheck.

Our ultimate goal is to help you save enough money so that your kids won’t have to support you when you get old.

In this personal finance guide for beginners, we’ll show you the way.

We always thought that personal finance was complicated and too confusing to understand unless you were an accountant. After one of us studied finance at Harvard Business School and the other went to medical school at the Mayo Clinic, we realized it doesn’t need to be complicated.

Personal finance boils down to a few simple steps that are easy to follow.

You may spend a lot more time on some steps than other steps. If it takes you 6 months or a year to make it to the next stop of the Beginner’s Guide to Personal Finance, that’s okay! The most important thing is to stick with it.

Go ahead and bookmark this Beginner’s Guide to Personal Finance, because you’re going to keep coming back to it throughout your journey.

The 8 Simple Steps to Personal Finance

The steps below form the core of the Beginner’s Guide to Personal Finance. While these steps seem straightforward, they are extremely powerful. If you learn them and follow them, you will both improve your relationship with money and be able to improve the quality of your life. We know we have! We will summarize the 8 steps below and then dive into more detail for each one.

beginner's guide to personal finance easy steps

1. Learn To Live Within Your Means

Research shows that the hardest part about reaching any goal is getting started. Saving money is no different. Most of us talk about wanting to save and what we would do with the money. But then we kick the can down the road and put off getting started until we “make more money”.

Most of the people who talk about personal finance tell us that they don’t know where to start. They have a job but are living paycheck to paycheck. We’ve been there too. For years. But you have to start somewhere. Saving just $10 a week will help you save over $500 in your first year.

Reading the Beginner’s Guide to Personal Finance is a good start! However, the first real step is to create a budget. A budget is a plan for how much money you will spend over a given period of time. We recommend starting by breaking it down by month. If you make $2,000 a month, then your budget must account for how every single one of those dollars will be spent or saved. 

Read: Personal Capital vs Mint

The easiest and best way to save is going to be by spending less money every month.

Set a realistic goal and slowly prove to yourself that you can save. In order to cut your living expenses we recommend focusing on housing first. Living with roommates, or even better, at home with your parents for a few years is a GREAT move.

We realized that we were spending too much money eating out every week so we began to cook more meals at home. Other items that you might be paying too much money for are monthly cell phone bills, cable bills, and car payments.

If you think you are already spending the bare minimum, you probably aren’t. If you still can’t find anything to cut, then you need to find a way to make extra money (ie. drive Uber/Lyft on nights and weekends).

It is important to put your credit cards away and not use them until you get your finances in order. You’ll be paying a lot more money in interest by carrying a credit card balance.

Don’t move onto step 2 of the Beginner’s Guide to Personal Finance until you have saved up and put away $1,000 extra dollars. If your savings drop below $1,000 you need to return to step 1.

If you still don’t know where to start, just email us and we can walk you through it. Make sure to check out our post dedicated to saving and budgeting to learn more!

2. Contribute Enough To Earn The Full Employer Match

Whether it took you 1 month or 2 years to get here, you should be very proud of yourself! Step 1 is the hardest! The next step is to max out any employer sponsored matching program, like a 401(k) with a matchThis is one of the few things in the Beginner’s Guide to Personal Finance that you should commit to memory!

Some companies offer an incredible perk to their employees in the form of employer sponsored retirement plans WITH matching contributions. What this means is that the company you work for will put money directly into your retirement account to match or partially match the amount you put in (up to a certain amount).

This is free money that you can ONLY get by also putting money into the retirement account.

Not maxing out this matching contribution doesn’t make sense. It is exactly the same as walking past a $10 bill on the ground and not stopping to pick it up. Don’t be a dummy. Pick up the money.

If your employer offers a sponsored retirement program like a 401(k) without a matching component, or if they don’t offer a retirement savings program at all, then you should skip this step. If they do offer it, fund only the dollar amount to get the full company match. Work with your company to calculate exactly how much you should contribute every month to max out their matching contribution.

Again, before a single penny goes anywhere else, you need to ask your company’s Human Resources (HR) department if your employer has a program like this. Do NOT assume that your company doesn’t have it or that you don’t qualify because you only work part-time.

To learn more about 401(k)s make sure to check out our awesome comprehensive guide to 401(k)s!

3. Pay Down Your High Interest Debt

Next, you need to pay down your high interest debt! Like credit card debt and payday loans this is your enemy. We think of high interest debt as anything with an interest rate higher than 8%.

It is critical to pay down your high interest debt because the balances will continue to grow as more interest is added. Most credit cards have interest rates from 15% to 25% per year! This means that the balance can grow dramatically even if you don’t spend another dollar! This debt will continue to grow until it is paid off, so you should put every single extra dollar you have on hand after maxing the 401(k) match into paying down high interest debt.

It is important to realize that your student loans will likely fall into the high interest category if they are not subsidized. Don’t include mortgages here since they are often large and can prevent you from saving for retirement for several years. Check with your loan providers or credit card companies to figure out your interest rates if you aren’t sure.

One last thing to remember is that you should continue to make the minimum payments on your moderate interest debt so that you don’t hurt your credit score. For many of you, it might take several years to climb out of the deep high interest debt hole, and that’s okay. Remember that financial freedom is a long-term journey. 

4. Beef Up Your Emergency Savings

You did it! You just dug yourself out of high interest debt hell. And saved yourself tons of money in interest. Now comes the more fun part – building wealth!

Now that your credit cards and high interest debt is paid off, the next thing you need to save for is an emergency. This emergency fund will be set aside to protect you in case of a medical emergency, loss of a job, or another catastrophe. The goal of this emergency fund is to help you get back on your feet as quickly as possible.

For example, if your car gets a flat tire, it will be hard to drive to work. The fund also limits the financial damage that can occur if your bills cannot get paid on time. We recommend that you save enough money to cover 3 months of your basic living expenses.

This money can be saved in cash in a safe place at home, but we recommend keeping it in a free online no-fee checking or savings account so that it can’t get stolen, lost, or destroyed. We recommend that you read our detailed post about emergency funds to learn more!

5. Open a Roth IRA.

Now that you have 3 months of savings for an emergency, you can breathe sigh of relief!

You’re also over half way done with the Beginner’s Guide to Personal Finance!

Now it’s time to start to save in a Roth IRA! An IRA (Individual Investment Arrangement) is a retirement account that has tax benefits. You can think of it as a bank account except that you decide what you want the money invested in. Why not just save more money into a savings account or open a normal brokerage investment account?

The answer is that these accounts can save you a lot money on taxes when you retire.

You’ll want to save 20% of your annual income here until you reach the annual contribution maximum of $5,500. You’ll want to save more if you are older than 30 years old or haven’t saved regularly for retirement. 

You can start investing on your own using apps like M1 Finance, Robinhood, Webull, and Acorns.

If you’d rather have a financial advisor help you, you can find a local one using Smart Asset or work with Facet Wealth, a company that helps you via video calls.

In general, many people start with a Roth IRA. The main difference between a Roth and a Traditional IRA is the timing of tax breaks. In reality, the most important thing is just to pick one and start putting money in it. Because of the tax advantages, the government has limits if you earn over a certain amount. You should look into them, but for most people they won’t be an issue.

To learn the ins and outs of IRAs, make sure you read our comprehensive guide to IRAs. You won’t want to miss it. And your future or current kids won’t want you to either.

But don’t forget that saving money in a Roth IRA isn’t enough. You also need to invest that money!! 

6. Pay Down Your Moderate Interest Rate Debt

You’re a personal finance star compared to your neighbors, but you aren’t done yet! You still have moderate interest debt hanging over your head. We consider moderate interest debt to be anything between 4% and 8%.  

You’ve already paid down your high interest debt so you should be very familiar with the drill.  This moderate interest debt can include personal loans, subsidized student loans, and other moderate interest loans. Don’t include mortgages here since they can prevent you from saving for retirement for several years. If you are averse to having any debt at all, this is the place where you’d prioritize paying off all of your debt (even low interest debt). Once everything else is paid off, move to the next step of the Beginner’s Guide to Personal Finance!

7. Top Out Your Retirement Savings

Congrats! Your high interest and moderate interest debt is paid off! Now you can make an even bigger monthly contribution to your retirement savings to help catapult you to financial freedom. We recommend a savings goal of 20% of your gross income for your retirement. Or more if you started late or are behind on retirement savings! 

This 20% includes any annual contributions you made to your 401(k) or Roth IRA in earlier steps!

The first step here is to max your contributions to your employer sponsored retirement fund (beyond their match). We recommend using your employer plan since your employer will usually help cover the administrative fees. If your employer doesn’t have a retirement saving plan, you’ll need to use a normal taxable account.

You’re almost done reading the Beginner’s Guide to Personal Finance! The most fun part comes next!

8. Save For Your Wildest Dreams

If you made it this far, you should be extremely proud of yourself! Few of your peers will be able to feel the freedom that you can already begin to taste. You set an ambitious goal of getting your financial life on track, and made a plan and stuck to it!

Now you can begin to think about other dreams like saving for your kids’ college tuition. Or paying down your mortgage early. If you haven’t been able to take a vacation, you can begin to set money aside for that as well!

7 - Day FREE Personal Finance Boot Camp!

In this free email course, we show you how take control of your money. From how to create your first budget (it's easy - trust us!), all the way to how to increase your credit score. Join now to get started today!

Our boot campers will also be notified of new articles!

We won't send you spam. Unsubscribe at any time. Powered by ConvertKit

29 thoughts on “Personal Finance 101: The Beginner’s Guide to Personal Finance”

  1. If I have a lot (~$74K) of debt between credit cards and student loans, how should I decide which one to pay off first? My higher interest loans are larger, but I am tempted to pay off my smaller, lower interest balance first just to simplify my life and to just get it over with. Is this crazy?

    • Hey Jimmy! Thanks for joining us here at The Finance Twins. You ask a great question. The short answer is that this isn’t crazy. In fact, what you described is referred to informally as the debt snowball method. This method says that you should pay off all your debts starting with the smallest balances, and to keep paying them off in ascending balance order, regardless of interest rate. The idea, in part, is that the small wins of paying off the debt will give you the momentum and psychological/emotional boost you need to pay off the debt as fast as you can. Obviously you hint at the fact that it’s not optimal from the perspective of paying the least amount of money since you might potentially pay your highest interest debts last, but it works extremely well for some people. The important thing to decide is what will get you started on the best path, and then to stick to the plan. All things equal, we recommend to pay off your highest interest debt first, but you have to do what feels right for you. Feel free to reach out or email us if at info (at) thefinancetwins(dot)com if you have any doubts or questions! -TheFinanceTwins

  2. One of my dreams is to own my home! And no, I don’t mean have a mortgage. I mean own the darn thing outright so that no one can ever take it away! I should be able to pay off my mortgage in 8 years and I can almost taste it!

    • Congrats! The 8 years will be here before you know it! Kudos to you for not only having that goal, but chasing it down.

    • I learned from an old friend how did he do it to be able to own 5 houses between California, Texas and 3 in Mexico. He told me that if you buy a house that is not that expensive verses buying one expensive one you are able to have more money in the long run. I was only 17 years back then. Today I am 42 and I own 4 houses and they are all paid off. How did I do it? I bought my first home when I was 24 years, I am currently 42 years old. I did it by working hard but I was smart with my money. I would get my tax money and pay off more on my home or save it and invest it in a potential property. So be smart when it comes to making and saving money.

  3. I just read the bios of both twins. Wow, you guys are inspiring! Your mom must be SO proud!! And I’m sure your father is too! I’d love to hear more about the personal finances of both twins…I understand that one has student loans from medical school. Have ya’ll heard about It’s a blog where a Harvard grad tracks his journey to pay off over 90k in debt as fast as he can. It’d be cool to follow along the journey of the twin with medical school debt and see how he applies the principles of saving/investing in his own life to reduce his debt.

  4. You are right.
    It isn’t rocket science at all.
    I’m amazed at how many educated people (like physicians) make a mess of their finances.
    Boost earnings. Keep expenses reasonable. Invest. Reduces Taxes. Protect against catastrophic losses. and you are good.
    Keep spreading the message guys. I grew up destitute and now have a finance MBA and an MD. I enjoy teaching others. You sound like kindred spirits of mine!

  5. My son age 20 just finished tech school and works full time earning about 55,000 a year he has no bills. Pays us $300 for rent. He started saving his money online with a interest rate of 2.10 APY at discover they are offering a CD for 12 months. He is matching his work’s 401 k and also putting in more. We don’t know where he should be saving his money in. Please help also what should be his first credit card? To build credit. Thank you

    • Hi A.R.! Congrats! It sounds like your son is off to a wonderful start. So smart to live at home and pay $300 in rent instead of rushing off to live alone and pay way more to live alone. Have him save as much as he can. If he can max out the 401K, that would be awesome. He can also open an IRA (roth or traditional) and start investing so that his money grows.

      The fact that he is so young makes this the perfect time to invest. Once he has 3-6 months of living expenses saved in a high interest account, the rest can be invested. We have different articles that discuss easy ways to invest.

      As far as credit cards, you can always add him as an authorized user on your card to help him establish credit (you don’t need to actually give him the card, but it’ll show up on his account). Look for cards with no annual fee (like a chase freedom card).

      Good luck, he’s off to an incredible start!

  6. Hi TWINS, Do you guys have any books to read? I really enjoy when i read your advice. So true and very interesting. Thanks

  7. I might be moving out in a few months, so I’ve been wanting to learn how to manage my money a bit better. I love how you mentioned starting by making a budget. thanks for all the great tips on managing money!

  8. Unfortunately this guide is USA centric without a disclaimer for non-USA savers, although some points could be common ground, others are just out of the scope…

    • Hi Ibán, the majority of our content is US-focused. The fundamentals of personal finance are universal, but you are right in that some of the advice (401ks, IRAs, etc.) is US specific.

  9. What if my student loans are less than 8% but it’s a very large amount?(Think 200k+) My interest rates are around 6-7% and I was considering refinancing. I’m not sure how to balance saving money and paying them off quick. I want to be aggressive and get them paid off in 10 years or less, but I also want to prepare for the future.

    • It depends on a few things. First you’ll want to make sure you keep making the payments while saving up an emergency fund. Then you need to decide how aggressive you want to be with debt repayment. If you want to be the most aggressive: contribute to your 401k/403b to get the full match then put everything else into the loans. If less aggressive: 401k match, minimum on loans, fully fund a roth IRA, and then remaining money to loans. Either way refinancing to the lower interest rate (assuming not government loans and NOT pursuing PSLF). The second option may be better to prepare for the future, but there’s no guarantee that the market will outperform 6-7% (assuming not refinancing). Remember that paying down the loans faster basically gives you a guaranteed 6-7% annual return on investment. You’ll also want to think about other goals. If you are trying to save for a house obviously paying off your loans won’t allow you to save for that. There’s a lot to consider here.

  10. Hello,

    I’m 36 yrs old and I am late to the 401k party . I am way behind but I do have a healthy savings account and do not have any credit card debt and my student loans are paid off. I’m currently maxing out my employer matched 401k and per your article , will be looking to open an IRA. I’m interested more in learning to invest and helping my Money grow for the long term. Thanks!

    • You are on the right track! Keep working toward your goals. Not having credit card debt or student loan debt is amazing. Now you can focus on investing and building wealth.

  11. Great article! Very informative and helpful! Thank you for sharing us the importance of financial management. Hope everyone sees this. I also suggest seeking expert advice on what’s the best thing to do with your money especially as an entrepreneur. It is also better to go for the ones that are dedicated to giving their clients their financial success.


Leave a Comment