The word “personal finance” involves investing, saving, and money management. None of our schools provide classes on money management; therefore it’s crucial to learn how to handle your finances on your own by reading competent books, articles, and listening to podcasts from some renowned experts in the subject.
The fundamentals of personal money management include budgeting, emergency fund creation, debt repayment, prudent credit card use, retirement savings, and much more.
However, financial awareness is not always attained by grasping the fundamental ideas. The greatest of goals to develop a sizable retirement fund or a pristine credit score can sometimes be derailed by human impulses. Disciplined behaviour and beginning to save and invest at a young age are therefore key components of personal finance.
Knowing the finest personal finance practices to use in our lives is always beneficial. In this post, let us see the good personal-finance practices that apply to all stages of our life:
Automate your savings:
There will always be an excuse for delaying saving. You have decades left until you retire if you’re in your twenties. It’s the financial obligations of a home and family in your middle years. Later on, it may be that dream trip you’ve always wanted to take. Humans lack patience and willpower. Make that one-time wise decision to automate your savings. You may arrange for regular transfers from your bank account to an NPS account, a PPF account, or to a basic bank recurring deposit or fixed deposit, just as your EPF payments are routinely taken out of your pay-check.
Putting off your investing for just one year might have a big impact on the total amount of money you end up with from your investments. Therefore, when it comes to investing and saving, never go off course.
Claim your tax-free money:
No matter your age, if you have access to an employer-sponsored retirement savings plan, such as an EPF, try to make enough contributions to receive the full employer match that most companies provide. Additionally, you can make a voluntary contribution to the employee’s Provident Fund (PF) account through the Voluntary Provident Fund (VPF). This contribution exceeds the 12% contribution an employee makes to his EPF. The highest amount that may be contributed is 100% of one’s basic salary. The return rate of interest is the same as that of the EPF. Tax exemptions apply to interest earned on VPF contributions of up to Rs 2.5 lakhs.
Save more from your salary hike:
We spend more as we earn more. Establish the practice of setting aside a certain portion of every pay increase for savings, in order to prevent “spending creeps” as your income increases. To boost your savings, set away a third to half of each pay raise you get. Savings objectives for young people are more influenced by what they do with future increases than by how much they save now.
Emergency fund is a must:
It’s widely accepted that you should keep three to six months’ worth of expenses in a bank fixed deposit, in a liquid debt mutual fund, or in a savings account. It is intended to cover unforeseen costs or emergencies. However, the save might also help you stay on course with your financial ambitions. It gives you financial peace of mind and may prevent you from making poor financial choices like selling your equity exposure in a gloomy market or using your retirement funds to pay for those unforeseen costs.
Try to come out of debt at the earliest:
Strike a balance between any conflicting objectives or commitments, such as education loans, credit card debt, or a down payment on a home. If you don’t quickly chip away at the debt that you have, then it will burden you forever. You can adopt either snow-ball method or attacking the small loans first and closing down them and then target the larger loans. Or you can adopt the debt-avalanche method by targeting the high interest rate loans first, closing them down rapidly, and then target the lower interest rate loans. Whatever method you adopt, you have to come out debt free sooner in your life. Always keep in your mind that “Borrower is always slave to lender. So, never ever try to be a slave in your life”.
Keep the long game in mind:
Resist the temptation to keep watching closely on the stock market. Keep your focus on your investing objectives rather than the daily swings in the stock market. It may sound cliche, but it’s better to go slowly. Investors may more effectively concentrate on best practices tailored to their age and stage of life provided they have a solid foundation in the fundamentals.
Final word
Your financial life will be easier as you age if you form sound financial habits early in your career. Debt repayment and savings are common practices in everyday life. If you can accomplish this simple practice with whatever minimal money that you have, you will establish positive financial habits for the rest of your life.
