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Unfortunately most high schools and colleges don't teach students how to handle money. When these kids graduate and find a job, all of a sudden they have money so they begin spending. They get credit and even spend money that they don't have.

The first basic rule to a successful financial plan is to have a budget. When it comes to personal finance, remember you are in charge. Whatever you want to budget for at the beginning of the month you can include in the budget. The main reason for a budget is to keep you from spending more money than you have.

To create a budget you simply need to put your monthly net income at the top of the page. Then list your expenses. Start with your most important which is food. Then rent or house payment, utilities, car payment, gas and any necessary clothes. After that you should set aside money for insurance. You will need car insurance and either homeowners or renters insurance. You should also set aside money to cover any deductibles from your health insurance policy. Don't forget life insurance. Term life insurance is quite cheap and I highly recommend getting it. After that then you can budget money for savings as well as money to do fun stuff. While I didn't mention it, it is also a good idea to give to a church or charity.

The next key to a financial plan is to stay out of debt. Using credit cards is not a good idea. You usually spend more money by using a credit card plus you add the risk of the credit card company misposting or losing your check. You then have a huge headache trying to get that straightened out. You can also see by the things that were listed in the budget that there are many expenses. Having a car payment is not a good idea. You would be much better off saving up money and paying cash.

Your next step would be to save about $10,000 just in case there is an emergency. Simply put that in a savings account and leave it. Then begin saving for a house. Make a large downpayment of at least 20% and DO NOT use the $10,000 you have for emergencies. You will saving thousands of dollars in interest if you get a 15 year fixed rate mortgage plus you will have the house paid for in 15 years or less. Your mortgage should also be 25% or less of your net pay.

Once you have set up your budget, are debt free and have bought a house, you should then begin investing. The best investment by far is the ROTH IRA. You should invest up to the maximum in that because it is tax free. You should then invest in your company's 401k up to the point where the company matches. The final investment should be in mutual funds.

If you follow these steps you will have a successful personal financial plan.

Learn more about this author, Art West.
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