Personal finance is all about discipline and consistency. Follow the below steps and prevent yourself from going into the downward spiral of reckless expenditure and credit default.
- Always prefer spending via card over cash. This helps in keeping a log where you are spending and helps in retrospective
- Open a fixed recurring deposit scheme. This can be anything like a recurring deposit of bank, or a mutual fund SIP etc. but it is very essential to park a fixed amount per month to provide a shade in your raining phase.
- Divide your expenses in different buckets like Health, Shopping, Entertainment and allot percentages more on health bucket items
- Don't spend using your credit card for anything other than grocery or utility bills
- Save at least 30% of your monthly income
- Keep your savings invested in multiple places like bank deposits, mutual funds, PF, long-term company stocks etc.
Before trying to make any budgets, just make a list of everything you spend money on for a month. Do it again for a month making some minor tweaks....I guarantee you will spend less!
Jumping from 0 to 100 with an excel spreadsheet budget simply won't work.
- Spend less than you earn.
- Put atleast 20% of your earnings into savings.
- Compound your capital through informed investments.
Important Financial Lesson should be Learn: 1. Set Clear Financial Goals
If you don’t have a set destination to work towards it can be hard to find the passion or drive to save. Whether it’s a house you’ve been eyeing on your retirement carefully defining these goals and figuring out how much you’ll need to save can help you craft a plan for getting there.
2. Start as Soon as You Can This process allows the interest on your savings to earn even more interest. The sooner you start to save for retirement, the more time your money has to grow and take advantage of compound interest. Time really is a powerful lead for your investments so waiting just a few years to start saving may significantly reduce the size of your retirement
3. Spend Less Than You Make It’s incredibly easy in this consumer-driven world to live beyond our means but a good rule of thumb is to try and save at least 15 percent of your income. If you find it easy to overspend try paying for things like clothes and groceries with cash instead of a credit or debit card.
4. Create a Budget: Creating a budget can be as easy as adding up all your expenses for the month and subtracting that amount from your total income. and spend a little some days than others but if you have a budget in place or set a daily spending limit you’ll be able to adjust and make up for any oversights another day.
All you really need to do is work on building a solid plan that you will commit to and stick with over the years.
1. Accounting for personal finances.
Managing finances will not work in any way if it is not possible to always see their clear picture: how much money comes in, how much it leaves, where it comes from, where it goes, how the items of income and expenses of a personal or family budget change in dynamics. Therefore,
in order to carry out competent personal finance management, first of all, you need to start keeping a record of home finances, the so-called home bookkeeping, at least in order to get an initial picture of the state of your money affairs, from which you will proceed.
2. Personal financial plan.
you must understand and clearly see why you need all this, that is, have financial goals or, if you want, life goals, the implementation of which directly depends on your financial condition. To determine the strategy for achieving your goals, a personal financial plan is drawn up,
in which you must plan all your financial flows and activities that will allow you to achieve these goals.
3. Family budget planning.
If a personal financial plan determines a strategy for achieving financial goals, then, in addition to a long-term strategy, constant tactical actions are also needed.
For this purpose, it is necessary to plan a family or personal budget. Family budget planning is best done on a monthly basis, since the monthly period most often coincides with the frequency of income. Before the start of each new month, analyze how you completed the previous budget and plan the next.
Increase personal income.
Perhaps the main goal pursued by personal finance management is, of course, to increase personal income. The person managing his money must, firstly, clearly understand how to increase incomes, and secondly, take concrete actions for this.
These two factors are closely interconnected and one without the other will be ineffective or not effective at all.
5. Optimization of personal expenses.
Along with work to increase revenue, personal finance management should include cost control. Moreover, it should be noted that increasing income is a more complex process,
which may not always go as we would like. But the optimization of personal expenses in this regard is still easier. Therefore, when it is not possible or impossible to increase revenues, the competent optimization of expenses will allow improving the financial condition.
6. Getting rid of debts.
Very often, people start managing personal finances precisely for this purpose, that is, wanting to get rid of debts. The presence of any debts, and especially debts on a paid basis (loans and borrowings) will always pull the personal budget down, so if a person has any debts, then the initial financial goal,
which he must set himself - to pay off debts as quickly as possible.
7. The creation of reserves, savings, capital.
Another major objective of effective personal finance management is the diversification of personal financial assets, that is, the creation of reserves, savings and capital.
Reserves act as a kind of “airbag” to secure personal finances in the event of force majeure situations, savings allow you to quickly achieve your financial goals, and capital is needed to create sources of passive income.
8. Competent work with banks.
Banks are those financial organizations
through which one way or another you will have to conduct your financial flows, therefore, managing personal finances always implies good knowledge in this area. You need to know the basic rules of working with banks, to be able to correctly choose a bank for servicing, to know which banking services are profitable and which are simply unacceptable. I.e,
it is necessary to be able to establish mutually beneficial partnerships with banks.
Investing is one of the most difficult tasks in managing personal finances, however it is investment activity that allows achieving the state of financial freedom (financial independence) so desired by everyone. Therefore,
if you want to achieve financial independence, in any case you have to become an investor, risk your capital and extract passive income from it.
10. Financial literacy.
With this critical factor, I want to summarize today's publication. The fact is that effective personal finance management is only possible if
if a person cares about his level of financial literacy and constantly tries to increase his financial literacy. This process should continuously accompany the maintenance of personal finances, in order to achieve maximum efficiency it is necessary to constantly improve your knowledge, skills and abilities, to recognize and introduce new ones,
actual methods of financial management.
Tell your money where to go so you can reach your goals. Set short term and long term goals.
Dont use credit card for small expances
These are some of the must have lessons to follow for personal finance management -
- Understand Debt.
- Know what you expect to earn before you borrow.
- Save, save and save a little more.
- Set an automatic savings financial plan and forget it.
- Learn how to cut back.
- Plan for the unexpected financial problems.
- Make your bank work for you.
- Work hard.
- Find a side hustle.
- To Ivy or not to Ivy.