Personal finance is defined as the management of finance and financial decisions of a person or a family. Personal finance includes budgeting, investment planning and retirement planning. Disciplined financial habits facilitate better and well defined decisions. It’s always good to start implementing disciplined financial practices when you are young. Most individuals start their career at the age of 22 or 23.
Most working youth tend to spend their entire salary. This practice can be seen till they turn 25. These youth are not able to meet expenses, thanks to their wayward spending habits; they blow up their entire income by mid month and are broke. This makes them think on availing credit cards and personal loan. Availing loans and credit cards is not a bad idea if they are availed for good reasons. Youth should think twice on applying for loans and credit cards, if they are to continue with their wayward spending habits. This leaves them with a huge debt burden. This can be easily avoided by controlling excess spending.
Each individual must plan, budget and check all expenses to have a track on spending. Availing loans and credit cards are not the way you must think of meeting expenses. The money you saved last month comes in handy this month to meet expenses. A Rupee saved is a Rupee earned.
You don’t need to have a rigorous financial plan. You can save at least 30% of your monthly income by following very basic saving plans. Implementing the below mentioned steps may help you have an independent and disciplined financial life and save yourself from paying hefty credit card bills and EMIs: Want to know more on Investment Planning? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.
1) Prepare your Budget
Prepare your budget each month. Try and stick to this plan as much as you can. Forecast expenses and allocate a budget for each item in budget list. Try to cut down on unnecessary expenses. Preparing a budget helps forecast expenses and track them.
Your budget must be planned in such a way that it covers all items that are required to lead a normal life. At the same time, make sure you have enough money to cover items in the budget. However, you must first save money and then start spending. Save at least 10% of your monthly income. You can have ECS activated which automatically deposits money from monthly salary in chosen investment and saving schemes.
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2) List of your Expenses:
Listing expenses eases the process of budgeting. This helps keep track of all items purchased and how much you spend. If there is any purchase that you have made that is not necessary, then you must stop spending on it.
3) Early Investment:
Saving and investing money in the right investment schemes at the start of your career would be easy as you are free from family burden. You must explore various savings and investment schemes. Start investing in the suitable schemes as per risk taking abilities. You can invest in EPF, PPF, VPF, RD and so on to plan for future and retirement life. Investing in these schemes is considered 100% safe.
If you have a lump sum amount, then you can invest in safe investment options like fixed deposits, post office saving schemes, NSC and so on. Debt funds could be safe. If you are ready to take medium to high risk, then you can invest in equity shares.
There are schemes that can be tailored as per requirement. All this comes handy only if you have the motive to save.
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4) Maintaining Emergency Fund:
Each individual must maintain emergency fund for emergencies. An emergency may occur at any time and you must be financially prepared.
Invest in liquid schemes for emergencies. You can avail health insurance, car insurance and home insurance for risk indemnity (protection from risk).
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5) Lower Dependence on Credit:
Availing credit cards and loans at a young age can be a bad idea. If you are not in a position to pay back debt, then your credit score takes a beating which hampers chances of availing important loans like home loan and car loans in the future.
Therefore depending on loans at a young age is not a good idea. Try to be debt free. Avail loans only when inevitable. Try to meet expenses from your own sources of income. If needed, cut down on certain things which are not really needed.
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