Five prudent tips for managing your personal finances
By Pushkina Nautiyal
New Delhi, August 28 (IANSlife): he most coveted form of independence is financial freedom. However, even those with the highest incomes can fall deeply into debt due to a lack of personal money management skills. Money management is a fantastic strategy for achieving your financial goals and can help you better understand where and how you are spending your money. Here are six suggestions to help you manage your finances to improve your bottom line.
The importance of budgeting
Budgeting is the process of creating a plan for spending your money. It’s basically listing all your expenses and allocating funds to them, balancing your expenses with your income. This plan allows you to determine in advance whether you have enough money to cover your expenses and any shortfalls. This simple exercise can help you prioritize your spending. Following a budget or spending plan will also keep you out of debt or help you get out of it if you are currently in debt.
Save before you spend
Young people who have joined the workforce and are earning a good salary tend to feel that they are financially secure for life. As a result, most of them avoid or even ignore investing for long-term or even short-term financial gain. Although savings help you meet day-to-day expenses, they are best used when invested in long-term investment opportunities. An important aspect of money management is setting an investment goal based on your priorities in life. Do you need money to finance higher education? Is marriage on the cards? Are you a young parent? Depending on your needs, you can choose from different types of investments such as mutual funds, term deposits, real estate, government or corporate bonds, stocks, etc. These can offer investors good returns at the end of an investment term, while working as a corpus to pay for emergency needs.
The power of composition
Einstein once said “Compound interest is the eighth wonder of the world. Whoever understands it, earns it and who doesn’t pay for it.” The power of compounding adds the profit made to the principal amount and then reinvests the entire sum to speed up the process of earning profits. Compounding is essentially a long-term investment strategy and it benefits the most when you start early. The longer your money is invested, the more time it has to grow. When it comes to compounding returns, time is at an advantage. The trick is to contribute regularly and regularly, regardless of the amount. Even the small contributions paid each month will increase.
Choose safe loan options
Sudden unforeseen expenses or emergencies can sometimes mean that we cannot meet our financial needs all the time. While running out of money between pay cycles, it can be tempting to take out payday loans, but these loans can cost you dearly. Payday lenders often charge high interest rates and fees and have much higher penalties/late fees. Other options such as credit cards and Buy Now Pay Later programs can be convenient, but also charge interest and late fees which can be costly. Instead, opt for solutions like Salary On-Demand that give you instant access to your earned but unpaid wages, without loans or high fees.
Ask the Experts
As a young adult, don’t make the mistake of thinking you’re too young to manage your finances or too rich to keep track of them. Talk to financial advisors and make the right decision based on your needs. It’s never too late to start learning and improving your financial knowledge to better understand banking, budgeting, debt and credit management, and investing.
No matter what stage of life you are currently in, having a prudent plan for managing personal finances is essential and important because it will help you live a good life now and in the future. coming !