Saving
If there's anything left after spending on necessities, you can start to establish some savings. Having emergency savings can help you avoid debt traps and major stressors should you face a layoff or unexpected illness.
Most financial experts advise that you should save anywhere from three to six months of bills in your emergency fund, but few people can do that all at once. You may need to budget a small amount to set aside each month to build your savings incrementally.
Investing
Once you've established a healthy emergency savings account and have paid your debts down, you can start to think about investing, which is a great way to increase your income. Investing can mean a lot of things, but here at The Fool, we're mostly focused on buying stocks and holding them in a diversified portfolio for the long term.
Index funds can be a great alternative to buying individual stocks, and many pay dividends that will come back to you periodically. Treasury notes, bills, and bonds are also safe investments for beginning investors.
Protection (insurance/estate planning)
Protection is listed last here, but it's something you need to consider throughout your personal finance journey. As your income and assets increase, you'll need more protection.
For example, if you start high school with a clunker of a car, you may only get your state's minimum insurance coverage – and that's fine.
But as you move through your career, you may want to upgrade to full coverage insurance for the car you bought brand new and hope to keep over the long term. This way, you're protected from being sued if you have an accident, and your car is also protected from becoming a total loss.
Other forms of protection include things like prenuptial agreements and estate planning, both of which are aimed at protecting your assets and giving you considerable say in what happens to them in the worst situations. Proper planning can also protect your family or heirs if you aspire to hand down generational wealth.
