Smart Personal Finance Management Tips
As you start earning, you realize how important is financial management. Needless to say, it is a part of adulting. People learn it through trial and error.
Here are some tips for financial management that you must start if you haven’t already.
If you are freshly employed, the first thing that you must do is stack up against your emergency fund. Life is unpredictable. You never know when you might have to incur an unexpected expense.
If this goes neglected, any unforeseen situation would throw you off the track of your regular lifestyle. Hence, this should be of utmost priority. This includes your bank saving a/c balance, life insurance, and medical insurance.
The amount of money that you would want to keep for your emergency fund is inversely proportional to the stability of your job. A government employee can afford to maintain a lower emergency fund compared to a private company employee.
Preparation for big expenses
A person usually has to make 3 to 4 big expenses during a year. Let’s say you are planning a vacation or you are hosting people for a festival party. You know that you will need to spend a lot. You have made a budget. Hence, you must start saving for the budgeted expense every month. This will not hurt your pocket at once.
You must set a financial goal for yourself. What does that mean? You must aim to have a lump sum amount 10-20 years down the line or by the time you retire. Your regular bank saving could never beat inflation. Thus, you must invest in stocks, government bonds, and mutual funds to earn better returns.
Budgeting and Tracking
One must budget their expenses based on 2 factors -a) their lifestyle and b) future financial goals.
Set a limit to your expenses. E.g., you would not spend more than 3500 rupees on restaurants and not more than 5000 rupees on shopping.
Also, track your earnings every week. This will let you observe your cashflows regularly. In case, you find yourself spending too much on a particular head, you can get frugal so that you do not exceed your budget.
Saving money is as important as earning money. You must get hold of a tax consultant who could advise you on the various tax deductions offered by the government.
One must expand their financial literacy continuously. To do so, one can listen to podcasts like ‘How to Money’, read finance books like ‘ The Psychology of Money ’, and watch credible finance YouTubers like Two Cents and Ankur Warikoo.