12 Personal Finance Skills Everyone Should Master

By Dr Penny Pincher

I was happy to see that my son signed up to take a personal finance class in high school next year. I think mastering basic personal finance skills is one of the most important things you can do to improve your happiness and quality of life. But you're a full-fledged adult. If you haven't already, the earlier you start developing and using personal finance skills, the more time you have to reap the benefits.

Here is my list of personal finance skills every frugal person should master.

1. Budgeting

Setting and following a budget is probably the most basic personal finance skill, yet only about one-third of people actually have a detailed budget. I went for years without an accurate budget, using my checking account balance as a rough gauge of how much money I had available to spend.

Eventually, I realized this was a terrible way to run my personal finances. A detailed budget is necessary to get a handle on where your money is going and to start deciding where you want your money to go — instead of just watching it go away!

Writing out a list of all of your income and expenses is only the first step toward becoming skilled at budgeting. You need to monitor spending and work to stay on track every month. Sometimes unexpected expenses will pop up, and it takes skill to find ways to spend less in other areas to recover and stay on budget.

You can get a real budget started by looking at your bank statements and credit card bills from last month and adding up spending by category. I used colored highlighters to mark up my spending into categories such as food, clothing, pets, entertainment, transportation, housing, utilities, etc.

Food expenses are especially challenging for me, since food cost varies so much depending on what you decide to eat. In my household, we use a money envelope as a tool to help us stay on our food budget. Every payday, I take out cash for the budgeted amount for food spending, both groceries and dining out. All food spending comes out of the money envelope, so we always know how much is left to spend on food.

2. Negotiation

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