Personal finance isn’t a subject covered in high schools or colleges and most young adults are left clueless about managing their finances. I have collated the 10 most valuable financial tips that investment experts suggest and an individual must know, to succeed early on in your financial life. Read on!
In this article
Track Your Expenditures
Most people don’t keep a track of how much they spend on a weekly or even a daily basis and they end up biting more than they can chew, then they find themselves in a debt wondering how they got there in the first place. There are a large number of ways an individual can keep track of his or her finances, such as expenditure tracking apps, recording cash inflows and outflows in an Excel sheet or by simply maintaining a ledger.
Make A Budget And Stick To It
Now that you know how much you are spending on a daily or monthly basis, its time to figure out how much you can afford to spend without going into debt.
Divide your budget between the necessities such as food, commute to work/college, etc, the luxuries/entertainment such as going out to eat in fancy restaurants or watching a movie, and the rest should be saved. Make sure you are more or less sticking to your budget and not deviating from it.
Start A Savings Account
So now that you have divided your budget, you should know exactly how much you should be saving so that you can have a relaxed life and retirement. Generally, most people completely neglected saving a part of their income and this leads to many problems in the future.
When you are in your 20s you probably won’t have children or the responsibilities of paying bills or mortgage, so you should ideally be saving more than half of your income now. You can start small and then slowly increase the amount you save every month.
A regular saving habit along with the power of compounding will make sure you have a large amount of money in your account by the time you have to send your children to college or by the time you retire.
Don’t Fall Into The Trap Of Attractive Schemes
There are 100s of people just waiting to scam you of your hard earned money using illegal schemes, they may seem attractive at first but know that if someone is offering to double your money in 2 months then it is probably a scam. Do a thorough research and read some financial tips beforehand about any schemes or plans that you want to put your money into.
If you have some free time during weekends or even during the weekdays, start reading about mutual funds and educate yourself regarding how these financial instruments work. Once you feel confident, start a SIP of a very little sum say Rs 100 to Rs 500 and invest in mutual funds according to your risk profile. As you see your money grow over time, you will feel confident in achieving your financial goals faster. You can invest regularly in any of the many platforms available today such as Groww.
Practice Self Control
Learning self-control is one of the most important virtues to have when managing your personal finance.
Do you really think you need another pair of those expensive Nike shoes or can you use yours a little longer?
Ask yourself these questions before you spend money on things that you can save on.
Do not indulge in impulsive buying, think twice before you decide to buy something.
Learn About Taxes
Even if you haven’t even received your first paycheck yet it is very important you know how much money you will have to give as a part of taxes. You need to know if your salary after taxes are cut and if it’s enough to meet your expenditures.
There are a lot of tax calculators that are available for free which you can and should use. Understand how much tax you will have to pay if and when you do get a salary increase.
Focus On Your Health
In the long run, your health will matter the most, if you are sick because you neglected your health in your 20s or 30s then all of the money you have spent saving will be of no use.
Also, health care is pretty expensive and you can avoid it if you make sure your body is fit and ready for any challenge. Think about getting health insurance to make sure in case you do get injured you don’t end up paying way too much.
Lose Bad Habits
Bad habits don’t just include the generic ‘Smoking and drinking’ but also habits such as impulsive buying and indecisiveness.
Of course smoking and drinking not only ruin your health but also is a very expensive habit to maintain, and in the long run, diseases such as cancer can ruin lives. Other habits such as impulsive buying can endanger your financial freedom and you may find yourself in debt.
Become Financially Literate
The fact that you are reading this article is a good sign, it means that you have decided to take steps towards achieving financial freedom for yourself. Gathering knowledge and information is perhaps one of the best ways to educate yourself about personal finance, the more you know the better decisions you can make. Read books and watch videos on financial tips instead of watching Netflix.
The bottom line is that you don’t need degrees from reputed universities to manage your finances, the only thing you need is self-control, discipline, and knowledge, all 3 of which you can learn by educating yourself. In no time you’ll be able to achieve financial freedom for yourself and live out your dreams!
Disclaimer: The views expressed in this post are that of the author and not those of Groww.