7 Personal Finance Lessons Learned in 2018

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There's a lot you can learn by reviewing how you did with your money over the last year. Let's look back at 2018 to see what kind of personal finance lessons it offered.Image source: Getty Images.

While 2018 is in the past, that doesn't mean we have to file it away just yet. To grow your money more in 2019, it can help to look back on all the hits and misses of the past year. Here are seven areas in particular to reflect on.

1. A high saving rate should be everyone's first priority

It's no secret that most people don't save nearly enough money, and as of April 2018, a whopping 65% of Americans were saving only 10% or less of their income.

Your savings rate is the foundation of your financial health. Building your emergency fund, preparing for future expenses, and investing for retirement are all only possible when you're saving a sufficient amount.

See how you're doing by calculating how much of your income you were able to save last year. A good goal to aim for is 20%, but the higher you can get that number, the better. Make sure you're also putting that money into one of the top bank accounts to earn more interest and avoid any unnecessary fees.

2. Watch out for overhyped investing trends

Anyone who held onto their cryptocurrencies for too long knows what I'm talking about here. Bitcoin, Ethereum, and the many other cryptocurrencies that cropped up were flying high for a couple months, but they crashed and burned just as quickly.

Like the old adage says, if something seems too good to be true, it probably is. Any time an investment seems like a can't-miss road-to-riches, approach it with caution.

3. It's hard to top index funds when it comes to investing

I tried my luck with picking stocks in 2018. While I had some success, I found that despite my dreams of making brilliant, lucrative trades left and right, I ended up putting most of my money in index funds.

For anyone who isn't spending a good chunk of their day analyzing the market, index funds are a far simpler option that still average a solid return. They may not be as exciting as picking stocks, but you also won't need to spend hours of your time on research. All you need to do is pick the right broker and invest regularly to start growing your wealth.

4. You may be better off renting than buying a home

While buying a home has long been seen as a smart way to build wealth, renting became the more financially prudent decision last year. Home prices and mortgage rates increased, making it cheaper to rent in many areas.

To grow wealth in these areas, it's actually better to rent and invest the money you save on housing than to buy a home. Renting also gives you more flexibility to move if you need to pursue a better job opportunity.

5. HSAs are an underappreciated way to save for retirement

When it comes to saving for retirement, people generally go with a 401(k), an individual retirement account (IRA), or both of the above. A less-common option is a health savings account (HSA).

An HSA is technically an account you can use for qualified medical expenses, but after retirement, you can also use it for living expenses without penalty. What makes these accounts so useful are all the tax breaks they provide.

You can contribute to your HSA tax-free, and your money will grow tax-free. You won't pay any taxes or penalties if you withdraw from your HSA for medical expenses. If you withdraw from it after retirement to use for living expenses, then you would pay income tax on it.

6. Credit card requirements are getting stricter, so make sure to find the right one

Credit card companies have been offering rewards and sign-up bonuses for years to attract new cardholders. While most consumers don't get new credit cards very often, there are those who apply for cards frequently to earn as many bonuses as possible (guilty as charged).

To combat this, credit card companies are adding restrictions on who they'll approve for a card. Many companies will now deny applicants who have too many new credit accounts or limit who qualifies for sign-up bonuses.

Since it's harder to get multiple cards, it's more important to do your homework on the best credit cards and pick one that will work well for you.

7. Don't panic when the stock market has a downturn

The stock market was having a fantastic year up until the last quarter of 2018. There are plenty of causes you can point to for the dip, including increasing interest rates and the trade war going on with China.

But it also stands to reason that the market won't always be on an upswing. The occasional bear market will happen.

The worst thing you can do when your investments take a hit is to panic and sell them to cut your losses. If you've made sound investments, you're generally better off staying the course and waiting for things to turn back around.

Learning from the past

Those are the most prominent personal finance lessons I took from 2018. Now that the holidays are over and the new year has begun, it's a good time to look back on how the year went for you and what you can improve on to make 2019 your most lucrative year yet.